More than 115 stockbrokers, including some of the top brokerages, have got a showcause notice from the markets regulator for continued association with the algo marketplace Tradetron. Many of them had given an undertaking to the regulator that they had discontinued their association with the platform but, according to the notice, they had not.
In this latest notice, which was issued last week and which Moneycontrol has reviewed, the Securities and Exchange Board of India (SEBI) has said that the move was part of its larger probe into Tradetron and other algo platforms.
Moneycontrol has written to Tradetron and some of the leading brokerages. The article will be updated when the responses come in.
The regulator observed that Tradetron was displaying algo trading strategies promising assured returns on its website (https://tradetron.tech). Stockbrokers associating with such a platform are in violation of a SEBI circular dated September 2, 2022.
The September circular had stated that, "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 regulator noted that 119 brokers had given an undertaking that they were in compliance with this circular. Therefore, the brokers should have discontinued their association with Tradetron, since it was a platform that showcased strategies promising assured returns.
However, the brokers continued to have their API integrated with Tradetron, the SEBI notice said. Tradetron acts as a bridge between the algo and the broking platform. After a user logs into Tradetron, he / she can fire a trade that an algo displays and his / her order will get executed through the broking platform.
Also read: Sebi passes settlement order in Trading Access Point case, NSE remits Rs 643 crore to regulator
According to submissions made by Tradetron, of the 119 brokers, 86 had paid for the integration but 33 had not. The platform submitted that it charged some brokers a one-time fee for integration. After the regulator's earlier directive, only five brokerages had requested disconnection of their API, but did not disconnect themselves from the platform, and the APIs of even these five brokers continued to be integrated with Tradetron.
Moneycontrol had written in August 2023 that more than 90 brokers were questioned by SEBI for their association with the platform.
The previous notice sent by SEBI had asked brokerages how their association with the Tradetron was not in violation of the September 2022 circular titled “Performance / return claimed by unregulated platforms offering algorithmic trading strategies.”
It was issued after the regulator was made aware that “unregulated platforms are offering algorithmic trading services / strategies to investors for automated execution of trades.”
The circular added that, “Such services and strategies are being marketed with ‘claims’ of high returns on investment. Further, ‘ratings’ have been assigned to the strategies, which could lead to investors being lured by such claims. This may amount to mis-selling of such services and strategies to investors.”
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
