Mint Explainer: Why have stockbrokers invited Sebi's scrutiny?

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Subscribe to enjoy similar stories. MUMBAI : India's capital markets regulator has issued show-cause notices to more than 120 stockbrokers for their association with Tradetron as a part of its larger probe into algo-trading platforms. Mint explains: The notices came after the Securities and Exchange Board of India (Sebi) found Tradetron to be displaying algo trading strategies promising assured returns on its website.

And a Sebi 2022 circular prohibits stockbrokers from any association with platforms offering assured returns. "Stockbrokers who are directly/indirectly referring to any past or expected future return/performance of an algorithm, or are associated with any platform providing such reference, shall remove the same from their website and/or disassociate themselves from the platform providing such references within seven days from the date of this circular," the circular had said. Sebi discovered that 119 stock brokers continued to have their application programming interfaces (APIs) integrated with Tradetron despite giving an undertaking that they had discontinued their association with the platform.

Moreover, Tradetron’s website showed referral links encouraging users to open accounts with brokers and promising trading strategies at a discounted price. While examining Tradetron, the regulator found that algorithm developers sold algo strategies through Tradetron’s platform by charging subscribers a fixed monthly fee, a profit-sharing fee or a combination of both. As a software-as-a-service (SaaS) platform, Tradetron charged users a subscription fee for accessing its algo-trading services.