The capital markets regulator Securities and Exchange Board of India (Sebi) may soon issue a framework on regulating algorithmic (algo) trading for retail investors, reported Business Standard.
The framework will be based on a discussion paper floated by the markets regulator in December despite pushback from the broking industry on certain recommendations — particularly the one around algo trades emanating from application programming interface (API).
The regulator and stock exchanges are together working on a framework to approve algo strategies and give a unique identification number to each of them to get a grip over algos aimed at retail clients.
Further, the proposed framework also intends to put the onus on brokers when it comes to monitoring algo programmes used by their clients.
Likely to be introduced by Sebi soon, the algo framework will be based on proposals in the discussion paper floated last year.
If approved, all API-based trading strategies will require preapprovals from stock exchanges before brokers can allow them as plug-ins. This clause had faced opposition from the industry, which had urged the regulator to demarcate non-algo and algo APIs.