Algo trading: Sebi may allow retail investors – Newz9

MUMBAI: Markets regulator Sebi plans to allow retail investors entry to algo-primarily based buying and selling. Currently, solely institutional investors are allowed to place in pc or algorithm-primarily based buying and selling, popularly referred to as algo buying and selling. According to market gamers, this might present a stage-enjoying subject for institutional and non-institutional investors within the buying and selling area.
On Friday, Sebi floated a draft round to allow retail investors to commerce algo. It has proposed a number of checks & balances for the brokers by means of whom investors could be allowed to position algo-primarily based orders. It additionally steered having a system on the trade stage that will allow the bourses to cancel algo orders that don’t adhere to guidelines, with out disrupting the general market.

A current Sebi examine on derivatives buying and selling confirmed that in FY24, round 97% of international funds’ earnings and 96% of proprietary merchants’ earnings have been generated from algo buying and selling, Ajay Garg, director & CEO at SMC Global Securities, mentioned. “The proposed refined framework of algo trading will build the trust of retail investors and help them generate higher profits, given that it benefited FPIs and institutional investors in the past.”
Sebi is now proposing extra safeguards to the prevailing regulatory framework to increase algo buying and selling to retail investors too. “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 markets regulator mentioned.
Sebi additionally proposes to spell out the rights and tasks of the investors, inventory brokers, algo suppliers/distributors and market infrastructure establishments (MIIs) in order that the retail investors within the area have sufficient safeguards. It put forth that retail investors will get entry to the accepted algos solely from the registered brokers. This presents higher alternatives for stockbrokers to broaden their buyer base in a regulated surroundings, Garg mentioned.
In its draft round, Sebi mentioned {that a} inventory dealer could be allowed to supply an algo buying and selling facility solely after it obtains permission from inventory exchanges for every algo. Also, all algo orders shall be tagged with a novel identifier offered by the inventory trade in order that an audit path is established.