Capital market regulator Securities and Exchange Board of India (SEBI) on Tuesday announced a new deadline for market entities and investors to prepare for its provisions to promote safer retail participation in algorithmic trading. The development comes after stock brokers and industry standard forum participants requested SEBI to extend a deadline to implement previsions laid out in its circular dated February 4.

The provisions and guidelines, as laid out in the circular, will now take effect on October 1, instead of the original deadline of August 1, according to SEBI. 

The extension will enable smooth implementation of the said provisions “without any disruption to the markets players and investors”, SEBI noted.

The development gives investors and market entities an additional two months to prepare for those provisions. 

SEBI has directed stock exchanges to notify all their members about the circular and make the information available on their websites, devise systems to ensure a strict enforcement of norms, and make necessary changes to applicable and relevant bye-laws to implement the provisions detailed in the circular. 

What does the February 4 SEBI circular say? 

SEBI has introduced a comprehensive regulatory framework aimed at enabling and protecting retail investors engaging in algo trading on Dalal Street. This comes in the wake of the growing adoption of algo-driven strategies among retail individual investors.

SEBI’s provisions–on “safer retail participation in algorithmic trading”–are aimed at providing safety, transparency and accountability in algo trading.

The provisions apply to all the recognised stock exchanges and brokers in the country.

This regulatory overhaul is aimed at making the country’s capital markets more inclusive, technologically advanced, and secure for market participants, while protecting retail investors’ interests.

Algo trading involves the use of computer applications and code to apply a predefined set of instructions or algorithms to execute trades in financial markets automatically in real time.