F&O Trading: SEBI Releases New Circular For Algo Trading, Know How it Will Impact Retail Traders

F&O Trading: The Securities and Exchange Board of India (SEBI) has released a draft circular imposing additional controls on algorithmic (Algo) trading in the stock market. The new guidelines seek to improve safety, transparency, and accountability, particularly for small investors. According to SEBI's requirements, each Algo order will now require a unique identification number to provide traceability and an audit trail. Brokers must acquire approval from stock exchanges for all algorithms and trading systems, including revisions. Additionally, Algo orders executed via APIs will be closely monitored, with brokers required to adopt two-factor authentication for API access. These techniques improve control, security, and the overall Algo system.

Algo Trading For Retail Traders

SEBI’s circular provides retail investors with a substantial chance to create and register their own Algo systems with brokers via stock exchanges. These self-created algorithms can be used by family members like partners, parents, and children. SEBI, on the other hand, has ordered brokers to phase out open API-based systems in favor of secure access and stringent IP tracking. Algo trading, which uses an automated system to execute transactions based on predefined criteria and real-time market data, allows for more efficient trading while saving investors time and effort. SEBI’s program encourages fairness and openness in Algo trading by allowing retail investors to implement their ideas using self-developed algorithms, opening up new avenues for small investors to maximize earnings.