SEBI extends deadline for retail algo trading norms to October 1

The Securities and Exchange Board of India (SEBI) on Tuesday extended the deadline for implementing its new regulatory framework aimed at facilitating safer participation of retail investors in algorithmic (algo) trading to October 1, 2025.

The norms, initially slated to come into force from August 1, 2025, were announced through a circular issued in February this year.

The decision to extend the timeline follows representations from stock brokers and participants of the Industry Standards Forum (ISF) seeking more time for smooth transition and implementation.

“In order to ensure smooth implementation without any disruption to the market participants and investors, it has been decided that the circular shall come into effect from October 01, 2025,” SEBI said in its latest circular.

The regulator has directed all recognised stock exchanges to notify their members and put in place appropriate systems and procedures to ensure compliance. It also asked exchanges to amend relevant bye-laws, rules and regulations accordingly.

Under the revised framework, SEBI plans to open up algo trading to tech-savvy retail investors while maintaining market integrity and investor protection.

Until now, only institutional investors had access to algorithmic trading, a practice that uses automated and pre-programmed instructions to execute trades at high speed and volume.

Brokers will be the principal entities offering algo trading via Application Programming Interfaces (APIs), while algo providers will act as their agents. All algo orders must carry unique identifiers issued by stock exchanges, allowing for better audit trails and oversight.

Retail investors developing their own algorithms will also need to register them with exchanges through their brokers if their usage crosses prescribed thresholds. Stock brokers are required to implement two-factor authentication, static IP access, and empanelment procedures for algo providers.

Meanwhile, exchanges will play an oversight role, including developing standard operating procedures for algo testing and maintaining surveillance of algo-based orders. They will also be empowered to use ‘kill switches’ to halt malfunctioning or suspicious algorithms.

The implementation standards are being finalised by the Broker’s Industry Standards Forum in consultation with SEBI and exchanges, with a completion target of April 1, 2025.