New Delhi. Market regulator SEBI has proposed to introduce algorithmic trading (algo trading) facility for retail investors. Currently, this facility is available only to institutional investors. This technology makes trading faster, cheaper and transparent through computer programs. Investors can buy and sell quickly using algo trading. This makes transactions easier in the stock market and increases liquidity. SEBI says that this facility will be given to retail investors with security and proper rules. SEBI has sought suggestions from the public on this proposal by December 3. After this the final rules will be issued. According to a previous study by SEBI, in FY 2024, 97% of FPIs (Foreign Portfolio Investors) and 96% of proprietary traders' profits in futures and options (F&O) trading came from algo trading.

According to the proposal made by SEBI, the facility of algo trading will be provided to retail investors through stock brokers. For this, the broker will first have to take permission from the stock exchange. Every transaction in trading will be tagged with a unique identifier given by the stock exchange, so that the trading can be monitored. The broker will have to take permission from the exchange for any kind of change in the algo system.

API will be used
API (Application Programming Interface) will be used for algo trading. Brokers will play the main role in this process, while algo providers or fintech companies will work as their agents. Providers providing algo trading facility will have to register with the stock exchange.

Stock exchanges and SEBI will make rules
According to a report by Business Standard, stock exchanges, in collaboration with SEBI, will decide the responsibilities of brokers and algo providers. A turnaround time (TAT) will be fixed to register certain types of algos (such as execution algos) faster. Ajay Garg, director and CEO of SMC Global Securities Limited, says that SEBI's proposal of algorithmic trading for retail investors is the need of the hour. He said that under the new framework, retail investors will be able to use only approved algos from registered brokers. This step will protect the interests of investors.