CURRENT AFFAIRS 18-12-2021

Daily Current Affairs – Topics 

Topics

• Proposal on Algo Trading
• The Black Money
• Biological Diversity (Amendment) Bill, 2021
• Manohari Gold Tea of Assam
• Vikas Portal

1. Proposal on Algo Trading

#GS3- Capital Market

Context

• The Securities and Exchange Board of India (SEBI) recently proposed that all orders generated by stockbrokers’ Application Programming Interface (API) be classified as Algorithmic Trading or Algo.

What is Algorithmic Trading and How Does It Work?

• It refers to trade orders that are generated at superfast speeds using powerful mathematical models and are executed automatically.
• It automatically monitors live stock prices and performs trades when certain criteria are met.
• This eliminates the need for the trader to monitor live stock prices and place manual orders.
• It gives the trader profit potential.

Algorithmic Trading’s Advantages

• The best potential pricing is used to conduct trades.
• The placement of trade orders is quick and precise (there is a high chance of execution at the desired levels).
• To avoid substantial price swings, trades are timed precisely and promptly.
• Transaction costs are lower.
• When placing transactions, there’s a lower chance of making a mistake.
• Reduced the risk of human traders making mistakes due to emotional and psychological variables.

The proposal’s major highlights are as follows:

• Algorithmic Trading Requires a Regulatory Framework: Algorithmic trading requires a regulatory framework.
• All orders originating from an APIs (Application Programming Interface) should be treated as algo orders and subject to stock broker oversight. APIs used to carry out algo trading should be marked with the unique algo ID issued by the stock exchange giving algo approval.
• An API is a programming interface for creating software that interacts with a pre-existing application.
• Exchange Approval: Each algo strategy, whether utilised by a broker or a client, must be approved by the exchange, and each algo strategy must be certified by Certified Information Systems Auditor (CISA)/ Diploma in Information System Audit (DISA) auditors, as is the present norm.
• Algo-ID: Stock exchanges must create a system to verify that only those algos are deployed that have been approved by the exchange and have a unique algo ID issued by the exchange.
• Client Orders are Controlled by the Broker: All algorithms built by any entity must operate on the servers of brokers, who are in charge of client orders, order confirmations, and margin information.
• Authentication: Every system that grants access to an investor for any API/algo trade should provide two-factor authentication.

The requirement for developing a regulatory framework

• The SEBI has created a regulatory framework to ensure that Algo trading is safe, that regular investors’ interests are protected, and that market manipulation is avoided.
• At the moment, exchanges approve Algo trading, which is created and coded by brokers.
• However, neither brokers nor exchanges can tell whether a deal executed using APIs by regular investors is an Algo or non-Algo trade.
• Unregulated and unapproved algos are a concern to the market since they can be used for systematic market manipulation as well as to entice regular investors by promising bigger profits.
• For retail investors, the potential loss in the event of a bad algo strategy is enormous.
• This is compounded by the concern that, because most third-party Algo providers are unregulated, there is no way for a retail investor to file a complaint.
• As a result, the SEBI has proposed a regulatory framework to address the problem.

Effects on

• Businesses:
• It’s a chance for brokers who provide APIs to their customers to develop their own Algo trading techniques, which will help them improve their technological capabilities and expand their client base.
• With the risk of manipulation reduced, they may reach out to more consumers and help them with their financial needs by assisting them in customising their trading techniques.
• It will allow brokerage firms to provide algorithmic services to their retail clients rather than just institutional investors, as is now the case.
• However, because obtaining the necessary clearance from stock exchanges is a time-consuming process, brokers may be forced to abandon the API system.
• Investors in the mass market:
• In terms of regular investors’ interests, the plan is undoubtedly a move in the right direction.
• It ensures that individual investors are protected and that their investments are suitable.
• Retail investors who want to engage in Algo trading will have more confidence as a result of the rules.
• There will be no price manipulations if a set of rules is in place, and investors may not have to suffer significant losses as a result.
• However, if APIs are not allowed, investors may switch to another system, and imposing limits will have an impact on the market’s development.

 

2. The Black Money

#GS3- Indian Economy & Related Issues

Context

• The government recently announced in Parliament that during 2015, the government received Rs 2,476 crore in tax and penalty under the one-time three-month compliance window.

In depth information

Money from the Underbelly

• All earnings acquired through illicit activities and otherwise legal income that is not recorded for tax purposes are referred to as “black money.” The proceeds of black money are frequently received in cash from illegal economic activity and are therefore not taxed.
• In economics, there is no single definition for black money. In layman’s terms, it’s money obtained through illegal methods or money that is unaccounted for, i.e. money for which no tax is paid to the government.
• There have been numerous estimates of the size of the black money economy, also known as the parallel economy, grey economy, shadow economy, or underground economy.
• According to some estimates, it might be anywhere between fifty and one hundred percent.
• While black money has been a problem in India for decades, it has become a serious danger with the opening of the economy.
• The amount of black money in Swiss banks is estimated to be $1.4 trillion in India, while the amount in Swiss banks is estimated to be $2 billion.
• Crime and corruption, noncompliance with taxes laws, complex procedural legislation, cultural and social norms, globalisation, and poor institutional, policy, legal, and implementation frameworks have all contributed to the growth of the black money sector.

Black Money’s Origins:

• As previously said, black money comes from two sources:
• illicit activity and tax avoidance, even when the activity is legal.
• Real estate prices have been steadily rising throughout the years. Because of the high stamp duty on real estate, builders are forced to undervalue the transaction cost. The builders take cash and convert it into high-value black money.
• Gold smuggling:
• With high customs fees on gold and high gold prices, gold smuggling provides an opportunity to invest black money in gold.
• Self-Help Groups (SHGs) and trusts:
• Some SHGs and trusts do not provide proper sources for the income and donations they receive.
• Corruption in government and administration results in a parallel economy within the government. More corruption and black money are being generated as a result of rising consumerism and the desire for material status.
• Shell Firms:
• In India, a task team constituted by the government has discovered 2.25 lakh shell companies. The major purpose of these shell corporations is to divert dirty money.
• NGOs and trusts:
• NGOs that receive financing from outside sources rarely file annual reports with the government. NGOs and their fund raisers take advantage of legal gaps in order to mobilise black money.
• Cash transactions, huge unbanked and underbanked areas, and the informal sector all contribute to India’s large cash economy.
• Tax Havens:
• Tax havens are often small countries or jurisdictions that impose little or no taxes on foreigners who choose to settle there. Strong confidentiality or concealment regarding wealth and accounts, as well as the ability to dwell in the shadows.
• Hawala:
• It is an informal and low-cost technique of transferring money from one location to another without the use of banks or other financial institutions. It works on the basis of codes and contacts, with no documentation or disclosure necessary.
• P-notes:
• Investing in P-notes does not necessitate completing a KYC process. P-notes’ anonymity is completely used in order to invest dark money in the formal economy.

The Economic Impact of Black Money:

• Because of the parallel economy, neither the government nor the private sector have a true picture of investment sentiment. Market distortions emerge as a result of this.
• For the government, black money equates to a loss of tax revenue. This limits the government’s ability to invest in social infrastructure.
• Low-quality infrastructure is a result of corruption in government projects and procurements.
• Because the Reserve Bank of India and the government have no control over black money. This makes it difficult for the RBI to effectively target inflation, and it also makes it difficult for the government to make fiscal policy decisions.
• Real estate prices are being pushed further higher by black money.
• Terrorist networks are funded by black money obtained through narcotics trafficking and smuggling. This is a serious threat to national security.
• Inequality and poverty are exacerbated by black money.
• In the economy, there is a distortion in investment. Investments in high-end and luxury items are created with black money.
• Due to hoarding, forward trading of goods by cash-rich speculators causes price fluctuations.
• By creating a vicious circle, black money encourages further corruption.
• When black money is used to manipulate bidding and offer kickbacks, it compromises the quality of public-sector initiatives.

Black Money’s Advantages

• In nations with the most repressive laws, black money delivers the largest benefits.
• Price controls or sales taxes were imposed by regimes, making items unavailable or costly. There was a way to mitigate the impact by using black money.
• Black money can also serve to mitigate the effects of institutionalised racism.

Ahead of Schedule

• The government has taken a number of initiatives to combat black money stashed overseas, many of which have shown favourable outcomes.
• Action in the Legislative Branch:
• Several laws have already been passed by the government in order to formalise the economy and make it mandatory to disclose commercial activities.
• The Central Goods and Services Tax Act, as well as state-level GST Acts, the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015, the Benami Transactions (Prohibition) Amendment Act, and the Fugitive Economic Offenders Act, to mention a few.
• Reporting transactions involving a PAN card:
• Another method used by the government to make it more difficult to conceal transactions is to require the reporting of PAN for transactions exceeding?2.5 lakh, as well as the prohibition of cash receipts of 2 lakh or more and a penalty equal to the amount of such receipts if a person violates the provision.
• Non-filers of income tax returns:
• The Internal Revenue Service has begun monitoring non-filers of income tax returns by utilising third-party data to identify individuals who have engaged in high-value financial transactions but have not filed their returns.
• Data and information exchange in real time:
• The availability of real-time data on Indians’ abroad investments has improved as India has emerged as a key force in efforts to build a multilateral regime for proactive financial information sharing, known as Automatic Exchange of Information (AEOI) (ATI).
• In 2017, the country implemented the Automatic Exchange of Information based on the Common Reporting Standard, allowing it to monitor the financial account information of Indian residents in other countries.

 

3. Biological Diversity (Amendment) Bill, 2021

#GS3-Environmental Pollution & Degradation

Context

• The Biological Diversity (Amendment) Bill, 2021, was just introduced in Parliament.
• The reforms aim to decriminalise certain rules and encourage more foreign investment in the biological resource chain, including research, patenting, and commercialization, without jeopardising national security.
• Opposition parties, on the other hand, have raised concerns about the bill, which has been assigned to a select committee. They urged that the bill be forwarded to a standing committee of Parliament.

In depth information

Bill 2021, Biological Diversity (Amendment): Key Points

• Once passed by Parliament, the Bill will amend the Biological Diversity Act of 2002.
• The Act aims to fulfil India’s obligations under the Nagoya Protocol and the Convention on Biological Diversity.
• The bill aims to relieve pressure on wild medicinal plants by supporting medical plant cultivation.
• The bill proposes exempting AYUSH practitioners from notifying biodiversity boards in order to gain access to biological resources or knowledge.
• The bill also makes research more efficient, simplifies the patent application procedure, and decriminalises some offences.
• Without jeopardising the national interest, the bill encourages more foreign investment in biological resources, research, patenting, and commercialization.
• The law focuses on who has access to biological resources and information, as well as how that access is monitored.
• The role of state biodiversity boards has also been clarified and strengthened by the bill.
• Offenses are being decriminalised. Violations of the law relating to access to biological resources and benefit-sharing with communities, which are currently recognised as criminal offences and are not subject to bail, are proposed to be reclassified as civil offences.

Concerns Voiced by Experts

• Trade trumps conservation:
• It prioritises intellectual property and commercial trade over the act’s main goal of biological resource conservation.
• Threat of Bio-piracy:
• Exemptions for AYUSH Practitioners from the requirement to get approvals could lead to “bio piracy.”
• The practise of exploiting naturally occurring genetic or biochemical material in trade is known as biopiracy.
• Biodiversity Management Committees (BMCs) are being marginalised: State biodiversity boards will be able to represent BMCs in determining benefit sharing arrangements under the proposed modifications.
• National and state biodiversity boards are mandated by the Biodiversity Act of 2002 to consult biodiversity management committees (formed by every local body) before making any decisions on the use of biological resources.
• Exempting Cultivated Medicinal Plants from the Act:
• The measure also exempts cultivated medicinal plants from the Act’s scope. It is, however, nearly impossible to tell which plants are cultivated and which are wild.
• Under the Act’s access and benefit-sharing provisions, this clause could allow huge corporations to avoid the need for prior approval or to share the benefit with local communities.

Next Steps

• Effective Forest Rights Act (FRA) Implementation:
• The government must work to establish confidence between its agencies in the area and the people who rely on the forests by treating them as equal citizens with the rest of the country.
• The FRA’s flaws have already been identified; all that’s left is to fix them.
• Integration of International Treaties: The Nagoya Protocol cannot be implemented in isolation and must be coordinated with other international agreements.
• As a result, while integrating the Nagoya Protocol with the International Treaty on Plant Genetic Resources for Food and Agriculture (ITPGRFA), legislative, administrative, and policy actions that cross each other’s paths must be considered.
• People’s Biodiversity Register (PBR):
• The PBR should attempt to capture people’s perspectives of how biodiversity resources should be managed, as well as their understanding of their status, usage, and history. It should also chronicle ongoing changes and forces driving changes in biodiversity resources.
• PBRs can be beneficial in preserving farmers’ or communities’ rights to traditional knowledge about a particular variety.

 

4. Manohari Gold Tea of Assam

Context

• Manohari Gold, a rare Assamese tea type, has been sold for a world record price of Rs 99,999 per kg.
• Previously, a rare Assam tea variety known as the Golden Butterfly Tea from Rossell Tea Industries’ Dikom Tea Estate earned Rs 75,000 per kg.

In depth information

Manohari Gold Tea Information:

• With only 80 grammes of buds picked each day compared to 20-25 kgs of tea leaves pulled per day, the production process is expensive.
• The way this tea is broken, the leaf, is likewise unique. It is broken between 4 and 6 a.m., before the sun’s rays fall. It’s a light beige colour, and the leaves and buds are both plucked.
• It is also known for its distinctive scent. This tea contains a variety of antioxidants.
• They also include bioactive substances that aid in the management of the consequences of ageing and fat.

 

5. Vikas Portal

#GS- Government Policies

Context

• The Union Minister for Rural Development and Panchayati Raj recently unveiled the MIS (Management Information System) Vikas Portal, which will rank states and UTs in land acquisition projects under the RFCTLARR Act of 2013.
• This webpage is the outcome of Prime Minister Narendra Modi’s vision to give the government’s Gati Shakti Mission a boost.

In depth information

About the Vikas Portal

• The Department of Land Resources created this MIS portal to collect data on many aspects of land acquisition that are needed to rank states and territories. It is a software-driven initiative that allows states and territories to input data on land acquisition for development projects.
• The portal was created at no cost in-house by the department’s NIC team.
• The MIS portal will display facts and figures as well as the country’s rate of progress.

Features

• Land acquisitions made under the RFCTLARR Act of 2013 from January 1, 2014 onwards will be covered for ranking purposes in the first phase, which will be an ongoing process.
• The states’/UTs’ suggestions/inputs were taken into account and incorporated into the ranking parameters.
• Each state/UT will receive a score out of a possible total of 140. Negative marking is also available as a means of delaying implementation.
• The entire ranking procedure is automated, and the department will not be involved in the raking process.

Importance and necessity

• Delayed project execution has been observed throughout the country, which drives up project costs and slows down development.
• All States will be able to access the ranking through the Vikas Portal, making it easier for them to track the progress of developmental projects.
• States/UTs will benefit from healthy competition provided by the site.

About  Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013( RFCTLARR Act, 2013).

• The RFCTLARR Act of 2013 repeals the 1894 colonial Land Acquisition Act.
• The new rule allows citizens to have a role in land acquisition, making the process more participatory, humane, and transparent.
• It promises to prohibit coercive acquisitions, increase compensation to landowners, rehabilitate and resettle families displaced by land acquisition, and grant gramme sabha decision-making power over land purchase.
• It prevents the government from purchasing land for unknown public uses in an indiscriminate manner.

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