This article summarises SEBI's February 2025 circular and reporting on it, in our own words. The source is credited under "Sources & credits" below. Details and deadlines have changed more than once, so always check the latest SEBI and exchange circulars and your broker's process. Nothing here is investment advice or legal advice.
For years, many retail traders in India ran trading bots by plugging directly into broker APIs, often with code from unknown vendors. Regulators could not easily tell an algorithmic order from a manual one, or who was responsible when an algo misbehaved. On 4 February 2025, SEBI issued a circular titled "Safer participation of retail investors in Algorithmic trading" to bring this activity into a formal framework.
How the framework works
As described in SEBI's circular and in industry explainers:
- The broker is responsible. Retail algorithmic trading runs through a stock broker, which is accountable for the algos its clients use and for monitoring their orders.
- Algo providers are empanelled. Third-party providers that offer algos to retail investors must be empanelled with the stock exchanges and work through brokers. They do not connect to exchanges directly.
- Algos are approved and orders are tagged. Algos are registered with the exchange, and each algorithmic order carries an identifier, so an algo order can be told apart from a manual one and traced to its source.
- API access is locked down. API access uses client-specific keys and strong authentication, and orders come from static IP addresses that the client registers with the broker.
- Self-built algos have a threshold. Investors who build their own algos can run them for their own account. Industry explainers report that once an algo crosses an order-rate threshold set by the exchanges (reported as 10 orders per second), it must be registered.
- White box and black box are treated differently. Explainers describe "white box" algos, whose logic is disclosed and can be replicated, and "black box" algos, whose logic is not disclosed. Black box providers are reported to need registration as a SEBI Research Analyst.
Timeline
The framework was originally to apply from 1 August 2025. SEBI extended this to 1 October 2025, and later set a phased schedule for brokers to get their systems and products ready. Because these dates have moved, we do not quote a single go-live date: check your broker for where it stands today.
What it means if you want your own system
Your system runs through your broker. A custom execution engine still places orders through your own broker's API, under your own account, from your registered static IP. Nobody needs custody of your funds.
Order rate matters. Design the system so it stays well inside the exchange's order-rate threshold unless you intend to register the algo. Batching, sensible retry logic and avoiding order spam help.
Logging is not optional. Every order should be traceable to the rule that produced it. That helps with compliance and with debugging.
Ownership is cleaner. When you own the code and run it on your own infrastructure, the logic is known to you. That is very different from renting an undisclosed black-box strategy.
This is how we build execution systems for clients: deployed on their infrastructure, connected to their broker, with the code handed over.
Sources & credits
- The Week (PTI), "Sebi extends time to Oct 1 to implement framework on retail investors participation in algo trade", 29 July 2025. Read it
The rules are SEBI's, and the reporting belongs to its author. This post summarises them in our own words and adds our own commentary.