Sebi Proposes Algo Trading Access for Retail Investors

In a significant move aimed at leveling the playing field, India's markets regulator, Sebi, is planning to allow retail investors to engage in algo-based trading. Currently, this advanced trading method is exclusively available to institutional investors. The proposal, if implemented, could redefine market participation and offer new opportunities for retail traders.

On Friday, Sebi released a draft circular outlining several safeguards and regulatory measures to facilitate this transition. These include systems at the exchange level to cancel non-compliant algo orders without disrupting the market. Additionally, the draft specifies the rights and responsibilities of all stakeholders, ensuring a balanced and secure trading environment for retail investors.

The move is supported by studies showing the substantial benefits of algo trading for institutional investors. Ajay Garg, Director & CEO at SMC Global Securities, believes this refined framework will build trust among retail investors and potentially yield higher profits for them. Sebi's proposal also includes stringent requirements for stock brokers and algo providers, ensuring only approved algorithms are accessible to retail investors through registered brokers.

This initiative not only opens new avenues for retail participation but also presents opportunities for stockbrokers to expand their customer base under a regulated framework. The unique identifier tagging of algo orders will maintain an audit trail, further enhancing transparency and accountability in the market.