Sebi extends timeline to roll out algo trading rules for retail investors

Retail algo trading, which allows investors to use automated strategies via computer programs, will be offered through application programming interfaces

India's markets regulator has extended the timeline to roll out algorithmic trading rules for retail investors, giving stock brokers more time to upgrade their computer networks for ensuring safer participation.

Retail algo trading, which allows investors to use automated strategies via computer programmes, will be offered through application programming interfaces (APIs).

As part of the new glide path for implementing rules, brokers must apply for registration of at least one algo strategy with the stock exchange by October 31.

The Securities and Exchange Board of India said that full registration of API-based retail algo products must be completed by November 30. To test the new systems, brokers are also required to participate in at least one mock trading session by January 3, 2026.

Brokers who fail to meet these deadlines will be restricted from onboarding new retail clients for API-based algo trading starting January 5, the regulator warned.

The measures follow the Sebi's earlier circular that introduced rules for the approval, tracking and regulation of algo trading for individual investors.

The framework requires brokers to get prior permission from stock exchanges for each algo and mandates a unique identifier on each order to maintain an audit trail.

The Sebi's move comes amid rising retail interest in algorithmic strategies, which offer faster execution and lower costs. According to a Sebi study, algorithmic trading made up 97% of foreign investor and 96% of proprietary trader profits in futures and options during FY24.