SEBI proposes regulatory framework to enable retail investors to participate in algorithmic trading

The Securities and Exchange Board of India (Sebi) has yesterday proposed a regulatory framework to enable retail investors to participate in algorithmic trading. The framework also suggests categorizing algos into two distinct types. The evolving nature of algo trading, particularly with the increasing demand for algo trading by retail investors, has necessitated a further review and refinement of the regulatory framework so that retail investors are also able to participate in algo trading with proper checks and balances, the regulator said in a draft paper. Under the proposed structure, brokers could offer algo trading only after obtaining the necessary approval from the stock exchange for each algorithm. The proposed e framework outlines the roles and responsibilities of stock brokers, stock exchanges, algo providers/ vendors, market infrastructure institutions (MIIs) and investors.