The Securities and Exchange Board of India (SEBI) recently released a regulatory framework to ensure safer participation of retail investors in algorithmic trading through brokers.
o Responsibilities of stock brokers and exchanges.
o Brokers shall act as principals, while algo providers/fintech vendors will act as agents using the broker's API.
o Retail investors developing their own algos must register them with the stock exchange through their broker if they exceed a specified order per second threshold.
o Registered algos can be used only for the investor’s family, not for others.
oThe threshold for algo categorization will be set by the Broker’s Industry Standards Forum, under the guidance of stock exchanges and SEBI.