SEBI to define algo trading, revamp stock brokers’ rules

Markets regulator SEBI on Wednesday (August 13, 2025) proposed to define ‘algorithmic trading’ as part of the exercise to revamp stock brokers’ regulations, which will ease compliance burden.

Also, the regulator has proposed granting stock brokers access to the Negotiated Dealing System, Order Matching (NDS-OM) platform. Generally, this platform is used by banks and primary dealers for trading government securities.

Under the proposal, the regulator would for the first time define ‘algorithmic trading’, which means any order generated or placed using automated execution logic. The current rules do not define algorithmic trading.

SEBI has also proposed to define Execution Only Platform (EOP), which means any digital or online platform which facilitates transactions such as subscription, redemption and switch transactions in direct plans of schemes of mutual funds.

“In order to permit stock brokers to carry out other activities, as may be specified by Sebi from time to time, such as accessing NDS-OM for trading in Government securities and to undertake securities market related activities in GIFT-IFSC under a separate business unit … it is proposed to have an enabling provision in the regulations,” SEBI said in its consultation paper.

Further, the regulator has proposed to include obligations and responsibilities of stock brokers in the new regulatory framework. These included protection of clients’ funds and securities, risk management and internal control and having a robust cyber security and cyber resilience framework.

Among others, SEBI has proposed enhancing obligations and responsibilities for qualified stock brokers (QSB).

The proposals are aimed at simplifying, easing and reducing the cost of compliance, while effectively balancing investor protection and compliance with laws of the land, to build trust in the industry, and facilitate its development and growth, SEBI said.

Also, the new regulations would be harmonized with the Companies Act, 2013, it added.

The Securities and Exchange Board of India (SEBI) has sought public comments till September 3 on the proposals.