TaxTMI 
TaxTMI 
Safer participation of retail investors in Algorithmic trading
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....ant advantages of timed and programmed order 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 aime....
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....amming Interface (API) extended by brokers to algo providers, 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 d....
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....d the broker shall seek approval from the Exchange for any modification or change to the approved algos. c) Brokers shall be solely 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....
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....hanges, in consultation with SEBI, • roles and responsibilities of the brokers including risk management system of brokers for orders through API. • roles of algo providers along with the criteria and process of 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 tim....
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....een maintained. 6. Exchanges and brokers shall continue to comply with existing provisions prescribed with regard to Algorithmic trading. 7. Schedule of Implementation: a) The implementation standards shall be formulated by the Broker's Industry Standards Forum, under the aegis of the stock exchanges and in consultation with SEBI by April 01, 2025^[1]. b) The provisions of this circular shall be applicable with effect from August 01, 2025^[2]. 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 abov....