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SEBI has recently revealed guidelines for the safer participation of retail investors in algo trading which was earlier accessible only to institutional investors. Algo trading provides various benefits such as faster and programming-based order execution, along with better liquidity.

To safeguard the investor’s interest, SEBI has highlighted the key steps that need to be taken by brokers which will be applicable from August 1, 2025. Stockbrokers can only provide the algo trading facility after attaining the required each algo strategy approval from the exchanges. There should be a unique identifier tagged to all the algo orders for auditing. Brokers have to actively resolve all the queries of the investors and monitor the API practices for prudent risk management. Brokers cannot allow open APIs and provide access only to a unique client-specific API key to ensure transparency. Algo providers and brokers have to disclose all the charges to the client to avoid any conflict of interest and build the investor’s trust.

Also, retail investors who are tech-savvy and use programmed knowledge to develop algos will have to register on the stock exchange through their stockbroker. All the necessary processes and steps shall be prepared by the Broker’s Industry Standards Forum in consultation with stock exchanges and SEBI by April 1, 2025. This decision by SEBI will increase the participation of retail investors in a secured environment which is also a positive move for the stockbrokers.

 

 

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