NSE sets rules to register retail algo strategy and empanel providers to safeguard investors

Trading member will have to put in place suitable systems to identify and ensure orders being sent by the client are below or above the defined threshold and appropriately tag the algo id in the orders being sent to the exchange.

The National Stock Exchange (NSE) has issued detailed operational modalities for empanelment of algo providers and registration of retail algo, as part of the overall initiative by the regulator and the exchanges to create an ecosystem for safe participation of retail investors in algorithmic trading, with new norms for retail algo trading set to kick in from August 1.

In a circular issued on July 22, the exchange said that all algorithmic trading strategies will have to be mandatorily registered and be given a unique identification. The revised unique identification mechanism will help the exchange identify algo orders from client Direct API (Application Programming Interface).

All algo providers will have to be empanelled with the exchange before registering their algo product, and the application and registration of algo strategy will need to be done through a trading member, before an algo ID can be assigned by the exchange.

"For all algo strategy registrations, whether the algo strategy is developed by Trading Member (In-house), algo strategy developed by algo providers or already empanelled vendors, the trading member has to submit a registration application with the exchange," said the NSE circular.

"In order to implement Sebi circular for providing access to algos to retails investors, members will be allowed to provide algorithmic trading to clients through a new category ‘Client Direct API’ and members will need to register each algo with the Exchange," added the circular.

For tech savvy client category, the trading member will have to disclose the PAN and unique client code (UCC) in the UCI portal to the exchange.

The trading member shall have to put in place suitable systems to identify and ensure orders being sent by the client are below or above the defined threshold and appropriately tag the algo id in the orders being sent to the exchange.

The broker will be fully responsible and liable for all orders emanating through their API /Algo Provider systems and it would be his responsibility to ensure that only clients who fulfil the eligibility criteria are permitted to use the API /Algo Provider facility.

The exchange will be maintaining an updated list of all the registered algo providers on its website.