On February 04, 2025, the Securities and Exchange Board of India (“SEBI”) issued a Circular (“SEBI Circular”) setting out the regulatory framework for safer participation of retail investors in algorithmic trading (see our analysis here). Under the Circular, the Broker’s Industry Standards Forum was tasked with framing the implementation standards, under the supervision of the exchanges. On May 5, 2025, the National Stock Exchange of India Ltd. (“NSE”) released the standards for implementing various processes detailed in the Circular, including granting API access to clients, client-generated registered algos, etc (“Implementation Standards”). The key components described in the Implementation Standards are analyzed below:
(I) Conditions for API Access and Static IP Requirements
To contextualize, the practice of automating placement of orders through broker-APIs was formally recognized as ‘algorithmic trading’ under the SEBI Circular. In terms of the directive, investors can carry out API-based algo trading through two routes: (a) on their own, using a unique API key provided to them directly by the broker; and (b) through an algo provider, i.e., the fintech entity/tech vendor that offers the facility of placing algo orders with brokers through broker-APIs.
In both the above cases, brokers are allowed to provide access to their APIs only through a unique vendor-client specific key and static IP to ensure traceability of the end user. In terms of the Implementation Standards, each client seeking API access to the broker’s trading system would be required to furnish a static IP address, which may be changed no more than once per calendar week. In case of API-access through algo providers, the static IP shall be that of the vendor or the client. Further, static IPs can only be shared between clients if they belong to one family. The Implementation Standards also allow for mapping of multiple API keys to a single client and mandates daily logout of all API sessions. These steps are intended to enhance the traceability and security of retail algo activity.
(II) Registration of Client-Generated Algos
Under the SEBI Circular, client-generated algos were required to be registered with exchanges if they exceeded specified order-per-second (“OPS”) threshold, that would be specified. The Implementation Standards set the threshold at 10 OPS per exchange. Simply put, if a tech-savvy retail investor develops an algorithm programmed to automatically place orders through the broker-API after certain market conditions are met, the investor would only be required to register this algo if the orders flowing to the broker are more than 10 per second. Algos operating below this threshold may continue without registration. However, such orders would still be categorized as ‘algo orders’ so that an audit trail is established and for appropriate monitoring of such orders. Brokers are required to monitor these flows in real-time and to reject orders that exceed the threshold unless they originate from a registered algo.
Client-developed algos crossing the prescribed OPS threshold must be registered with the exchange through the broker and would be tagged with a unique exchange-provided identifier. For client algos, brokers are required to submit the necessary details to the exchange for registration, with any subsequent changes to the algo’s logic necessitating re-approval. Algo providers must be empaneled with the exchange and register all their algos. Each such algo would be assigned a unique ID that may be used across brokers.
(III) Arrangements between brokers and algo providers
SEBI has allowed algo providers and brokers to share subscription charges and brokerage collected from the clients. However, all such charges must be disclosed to the client and the brokers should ensure that the arrangement does not result in any conflicts of interest. Through the Implementation Standards, it has been clarified that in addition to commercial arrangements, brokers may also establish technical arrangements with algo providers to integrate the broker’s systems (via API or otherwise) with the algo provider’s technology platform. In any case, algo providers would be acting as the broker’s agent and the broker would be responsible for all orders emanating through its APIs and ensure that the algo provider is not involved in any misconduct.
While the Implementation Standards clarify certain aspects of the framework for API-based algo trading, several key guidelines and processes, viz. criteria and process for empanelment for algo providers, roles and responsibilities of algo providers, detailed operational modalities/FAQs, registration process for client-generated algos, etc., remain to be notified. As the implementation date of the SEBI Circular, i.e., August 01, 2025 approaches, market participants must prepare for compliance with the existing provisions while remaining cautious in areas where guidance is awaited.
You can mail us your queries and comments at Finsec Law Advisors.
