Sebi extends deadline for retail algo trading rules implementation

Capital markets regulator Sebi has extended the timeline for implementing rules related to retail investors‘ participation in algorithmic trading. The implementation standards for the regulator’s proposed norms were supposed to be finalized by April 1 by the brokers. However, this is now extended till May 1. The actual effect of the circular, which was brought out in February will be from August 1.

Sebi’s decision came after stock exchanges sought to extend the deadline, citing the need for further discussions with brokers.

Stock exchanges have been directed to take necessary steps to update their systems, amend relevant regulations, and inform brokers about the changes.

Sebi rules on participation of retail investors in algo trading provides advantages of faster order execution and improved liquidity.

At present, only institutional investors are allowed to put in algo trading, which provides significant advantages of timed and programmed order execution.

The regulator came out with a regulatory framework aimed at spelling out the rights and responsibilities of the main stakeholders of the trading ecosystem such as investors, brokers, algo providers/vendors and Market Infrastructure Institutions (MIIs) so that the retail investors can avail algo facilities with requisite safeguards.Under the framework, retail investors will get access to the approved algos only from the registered brokers, which will safeguard the interests of these investors. The facility of algo trading would be provided by the stock broker only after obtaining requisite permission from the stock exchange for each algo.Brokers will be solely responsible for handling investor grievances related to algo trading and the monitoring of APIs for prohibited activities.

For better oversight, any algo provider, providing the facility to place algo orders with brokers, through API, will require to be empanelled with exchanges.

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