Sebi extends timeline to rollout algo trading framework for retail, with a glide path for brokers

Sebi extends timeline for Retail Algo trading framework, sets glide path for brokers

Capital market regulator Sebi has extended the timeline for the implementation of its framework on “Safer participation of retail investors in algorithmic trading”, giving stock brokers more time to comply with the new guidelines, a circular said on September 30.

The framework, initially scheduled to take effect from August 1, 2025, was first deferred to October 1, 2025. Now, Sebi has provided a phased glide path after brokers and algo vendors sought additional time to make system-related changes based on clarifications issued by stock exchanges in September.

Sebi's circular said, “In order to ensure smooth implementation of the framework, Sebi has been engaging with exchanges, broker associations and algo vendors. During the discussion, it was informed that majority of the stock brokers require more time to carry out the necessary changes in their systems on the basis of clarifications/modifications specified in operational modalities.”

As per the new milestones, stock brokers must apply for registration of at least one retail algo strategy through an API by October 31, 2025. Registration of retail algo products and a few strategies must be completed by November 30, 2025, and participation in at least one full-fledged mock trading session is mandatory by January 3, 2026.

Brokers failing to meet these deadlines will be barred from onboarding new retail clients for API-based algo trading from January 5, 2026. The entire framework, along with detailed operational standards, will become applicable to all brokers from April 1, 2026.

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The Sebi circular said that the stock brokers, who are not ready to go live from October 01, 2025, are advised to provide the information regarding the number of existing clients as on September 30, 2025 to exchanges. It further read, with effect from April 01, 2026, algo framework specified in February 04, 2025 circular along with implementation standards and detailed operational modalities will be applicable for all stock brokers.

The aim of the norms is to clearly lay down the rights and responsibilities of all stakeholders – investors, brokers, algo providers/vendors, and the Market Infrastructure Institutions (MIIs) like exchanges, depositories and clearing corporations.

Under the framework, all algorithmic trading strategies have to be mandatorily registered with exchanges 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).

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