SEBI Shuts Down Loophole Used by illegal Algo Providers

The Securities and Exchange Board of India (SEBI) updated its algorithmic trading norms to curb illegal activities. The final circular, released on February 4, 2025, requires brokers to tag all orders through APIs as algorithmic with unique identifiers. This update targets a loophole that allowed illegal algo providers to avoid detection by operating below the specified order threshold.

Previously, only orders exceeding this threshold were tagged. The new norms ensure that even low-frequency orders are monitored, enhancing market integrity and protecting retail investors. SEBI’s move balances regulatory compliance with ease of operations for retail traders, who can now automate strategies without cumbersome hurdles.