SEBI Proposes to Add Algorithmic and Proprietary Trading to Broker Regulations

As per news reports, the Securities and Exchange Board of India (SEBI) has released a consultation paper proposing the addition of algorithmic trading and proprietary trading to its master stockbroker regulations. The proposals are part of a review for aligning the rules with the Companies Act, removing redundancies, and reflecting changes in market practices and technology. 

As per the report, the feedback can be submitted until September 3, 2025.

New Definitions Proposed

Currently, the regulations do not define algorithmic trading. SEBI has suggested defining it as any order generated or placed using automated execution logic. Proprietary trading has been proposed to mean trading in any segment of a recognised stock exchange by a broker using its own funds. The paper also proposes definitions for “Execution Only Platforms” and “Clearing Members” to provide regulatory clarity.

Compliance Changes

The regulator has proposed removing the existing definition of “small investors,” which linked the term to daily trades not exceeding ₹50,000, citing its limited relevance. Another proposal would require at least one designated director of a stock broking company to reside in India for 182 days or more in a financial year.

Read more: SEBI Pushes Algo Trading Deadline to October 1, 2025!

Access to NDS-OM and GIFT-IFSC

SEBI has proposed permitting stock brokers to access the Negotiated Dealing System–Order Matching platform for trading in government securities, and to participate in securities-related activities in GIFT-IFSC through a separate unit. This platform is currently restricted to banks and primary dealers.

Alignment and Simplification

The consultation paper includes measures to bring parity between sub-regulations and other intermediary regulations, remove inconsistencies, and simplify language. A SEBI working group, consisting of exchanges, brokers, legal professionals, and investor representatives, was involved in drafting the proposals to streamline compliance requirements.

Conclusion

Once finalised, the changes will require approval from the SEBI  board. The regulator stated that the objective is to update the regulations in line with current market operations and technology while maintaining investor protection.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

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