Algo trading: SEBI’s Crackdown Reviewed
Table of Contents
Introduction
After reading this post on algo trading, you’ll know exactly how SEBI’s February and July 2025 measures may impact your strategy and compliance roadmap.
You’ll discover:
- How unique order IDs and API rules enhance traceability
- The limits of enforcement and what SEBI lacks
- How India’s approach compares with SEC/ESMA standards
What You’ll Learn
You’ll walk away knowing exactly which algo trading practices now risk penalties—and how to avoid them.
We show actual SEBI circular text and enforcement data (e.g. Jane Street orders flagged) supporting our analysis.
Benefit from:
- Clear compliance checklist
- Real enforcement metrics
- Global best-practice alignment
Three Key Benefits
- Spot compliance red flags—unique IDs, API restrictions, and spoofing deterrents.
- Understand SEBI’s limitations—enforcement delays, agency overlaps, and tech gaps.
- Benchmark your setup against SEC/CFTC/ESMA and exchange-level rules.
What Is algo trading?
Algo trading refers to automated, rule-based trading executed by software without human intervention.
It drives the vast majority of derivatives volume and enables both efficiency and, at times, market distortion.
SEBI’s Crackdown Explained
Why It Matters
- Over ₹1.05 lakh crore of retail losses in FY25 spotlighted the issue
Source: The Economic Times
- SEBI’s interim ban on Jane Street for alleged index manipulation shows the regulator’s intent . Source: Reuters
Core Circular Measures
- Unique Order IDs: Each algorithmic order now traceable to user.
- API Controls: Eliminated open APIs—key-based and OAuth only.
- Algorithm Registration: Mandatory if orders/second exceed exchange thresholds.
- White-Box vs Black-Box: White-box is transparent; black-box requires RA licensing & reporting.
Regulatory Gaps & Enforcement Constraints
- SEBI lacks dedicated enforcement teams, delaying interventions by years.
- Overlapping jurisdiction with CCI, RBI, ED—fragments oversight and slows resolution.
- No advanced real-time surveillance equivalent to MIDAS or Regulation SCI—India still building RegTech capacity.
Global Comparisons
- SEC/CFTC (USA) mandate pre-trade risk checks and system compliance (Reg SCI, Rule 15c3-5).
- ESMA (EU) enforces algo thresholds and transparency via MiFID II.
- India’s measures echo these but lag in tech implementation, relying on circulars rather than statutes.
Next-Step Call to Action
Download the Kosh app to experience stressless algo trading