9911796707
TMI BlogSafer participation of retail investors in Algorithmic tradingX X X X Extracts X X X X X X X X Extracts X X X X ..... r execution. At present, there are mechanisms such as Direct Market Access Facility, which enable institutional investors to trade through Algorithms. 3. There has been an increasing demand for algo trading by retail investors. In order to facilitate safer participation of retail investors in algo trading, with Stock Brokers (hereinafter referred to as "Brokers") and Stock Exchanges (hereinafter referred to as "Exchanges") playing the required roles in risk management, it has been decided to review and refine the existing regulatory framework to ensure proper checks and balances, to safeguard investor interest as well as integrity of the market. 4. The regulatory environment envisaged is aimed at spelling out the rights and responsibili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, shall be tagged with a unique identifier provided by Stock Exchange. c) Algos developed by tech-savvy retail investors themselves, using programming knowledge, shall also be registered with the Exchange, through their broker, only if they cross the specified order per second threshold [Specified threshold for categorization as an Algo shall be evolved by the Broker's Industry Standards Forum, under the aegis of the stock exchanges and in consultation with SEBI]. Further, the same registered Algo shall be permitted to be used by such retail investors for their family (but not for other investors). 'Family' for this purpose would mean self, spouse, dependent children and dependent parents. d) Brokers shall: * ensure that they have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... responsible for handling investor grievances related to algo trading and the monitoring of APIs for prohibited activities. III. Empanelment and Registration of Algo Providers: a) While algo providers shall not be regulated by SEBI, for better oversight, any algo provider, providing the facility to place algo orders with Brokers through API, shall require to be empaneled with Exchanges in a manner as stipulated by Exchanges. b) Exchanges shall specify the empanelment criteria for the algo providers. c) Before onboarding an empaneled algo provider on its platform, the broker shall also do the necessary due diligence. d) Algo providers and brokers may share the subscription charges and brokerage collected from the client. However ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f empanelment of algo providers. * registration process for algos and the circumstances in which a re-approval shall be required. * measures to enhance the confidentiality of retail algo strategies including confidentiality clauses, non-disclosure agreements, encrypted submissions etc. * data flow between the algo provider, broker and the Exchange, while ensuring that the broker remains responsible for compliance with the outsourcing guidelines specified by SEBI from time to time. d) Exchanges shall specify the turnaround time (TAT) to register certain types of algos (eg. Execution algos) on a fast track basis while registering other types of algos on a normal basis. For both these scenarios, TAT shall be decided by the stock ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsultation with SEBI by April 01, 2025. b) The provisions of this circular shall be applicable with effect from August 01, 2025. 8. Exchanges, are hereby, directed to: a) take necessary steps and put in place necessary systems and procedures for implementation of the above. b) make necessary amendments to the relevant bye-laws, rules and regulations for the implementation of the above provisions. c) bring the provisions of this circular to the notice of their brokers and disseminate the same on their website. 9. This circular is issued in exercise of powers conferred under Section 11(1) of Chapter IV of the Securities and Exchange Board of India Act, 1992, read with Section 30 of the Securities and Exchange Board of India ( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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