Sebi allows safer participation of retail investors in algo trading
markets regulator Sebi on Tuesday facilitated the participation of retail investors in algorithmic trading (algo trading), which provides advantages of faster order execution and improved liquidity. At present, only institutional investors are allowed to put in algo trading, which provides significant advantages of timed and programmed order execution.
Also, the regulator came out with a regulatory framework aimed at spelling out the rights and responsibilities of the main stakeholders of the trading ecosystem such as investors, brokers, algo providers/vendors and Market Infrastructure Institutions (MIIs) so that the retail investors can avail algo facilities with requisite safeguards.
The move will be applicable from August 1, the Securities and Exchange Board of India (Sebi) said in a circular.
«In order to facilitate safer participation of retail investors in algo trading, with stock brokers and stock exchanges playing the required roles in risk management, it has been decided to review and refine the existing regulatory framework to ensure proper checks and balances, to safeguard investor interest as well as integrity of the market,» Sebi said.
Under the framework, retail investors will get access to the approved algos only from the registered brokers, which will safeguard the interests of these investors.
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