The Securities Exchange Board of India (SEBI) on February 04, 2025, issued a notification regarding the safer participation of retail investors in Algorithmic trading.
EBI has introduced a revised regulatory framework to facilitate the safer participation of retail investors in algorithmic trading through brokers while ensuring market integrity. Under this framework, brokers will act as principals, and algo providers as their agents, requiring all algo orders via APIs to be tagged with a unique identifier. Brokers must also implement security measures, including whitelisted static IPs, two-factor authentication, and OAuth-based authentication. Additionally, brokers will be responsible for investor grievance redressal and API monitoring, while stock exchanges will supervise algo trading, approve algos, and define empanelment criteria for algo providers.
Further, algos will be categorized into "White Box" (execution algos with disclosed logic) and "Black Box" (non-replicable algos requiring Research Analyst registration and detailed reports). Exchanges must establish a fast-track and normal registration process for algos and ensure compliance with confidentiality measures. The Broker’s Industry Standards Forum, under SEBI's guidance, will finalize implementation standards by April 1, 2025, with the new framework taking effect from August 1, 2025.
[Notification No. SEBI/HO/MIRSD/MIRSD-PoD/P/CIR/2025/0000013]
