SEBI’s Algo Trading New Rules: Threshold Limits, API Rules and Registration

The new SEBI algo trading framework has arrived at a time when algorithmic trading is expanding rapidly in India, especially among retail traders who rely on automation. In February 2025, the SEBI introduced new rules that focus on transparency, registration, API usage and risk control. To put these norms into action, the NSE released its detailed compliance standards on 5 May 2025, which have been fully implemented from 1 August 2025.

Together, SEBI’s regulatory framework and the NSE compliance standards aim to make algorithmic trading safer, more transparent and more accessible for retail traders. Before looking at the standardisation norms mandated by the NSE and SEBI, let’s understand what algo trading is all about. 

What is Algo Trading?

Algorithmic trading is the use of computer programs to place and execute trades automatically according to predefined instructions. These instructions are built around factors such as price, quantity, timing and market conditions, allowing trades to happen at speeds and frequencies that human traders cannot match.

Know how algo trading works and which algo strategy you must use!

AlgoTest: Best Platform To Enter The Algo Trading Ecosystem

AlgoTest is the best platform for algo-trading, especially for retail traders. It lets you build, test, simulate and automate trades without writing a single line of code. Whether you’re an options seller, a directional or indicator-based trader, or completely new to algorithmic trading, AlgoTest gives you the tools to trade with data, discipline and confidence.

What you can do with AlgoTest:

1. Backtest your strategies on years of historical data, get drawdowns, win rates, risk metrics, and profit curves before risking real money.
2. Simulate in real-time using forward-testing to fine-tune strategy adjustments.
3. Build strategies without coding via the no-code Strategy Builder and Option Simulator.
4. Automate your trading through broker integrations or webhook signals from TradingView/ChartInk.
5. Track performance with detailed analytics that reduce emotional, inconsistent trading.

With AlgoTest, you can effortlessly move from idea → build → test → automation, making it a great tool if you want to experience the real benefits of algo trading in India.

Why SEBI Introduced New Algo Trading Standards

Earlier, it was only the institutional investors who were using Algo trading platforms. However, with the growth in retail participation in the markets, across segments, algo trading has been gaining immense importance. While this form of trading can be highly beneficial for super-fast trade execution, knowledge and compliance are necessary.

This is why SEBI asked the stock exchanges to frame the standards for algo trading and made registration of algos mandatory if the algos exceed the threshold. This will ensure that retail traders do not get exposed to unnecessarily high risks that are associated with automated trading platforms.

NSE Algo Trading for Retail Traders and Investors – Key Compliance Norms

Here are the main changes that one can observe in the algo trading platforms.

• There is a concept of Threshold per second (TOPS). 

Now, the algos that exceed this TOPS must get registered. Currently, as per the NSE circular, the TOPS has been decided to be 10 orders per second. So, if any algo can generate more than 10 orders per second, then that needs to be registered.

• If the orders are brought by APIs, then those also need to be tagged as algos for risk management.
• If any unregistered algo crosses the TOPS, it will be slashed out of the trading system. 

It is the broker who needs to reject such an order when orders cross TOPS from unregistered algos and shouldn’t process the same. Brokers offering API connectivity to the traders must also have the system or facility to monitor as well as control the threshold limit for unregistered algos.

• While brokers can create and share different algos with the clients, those need to be registered in the first place. 

If they want to provide the algos independently, then they need to be on the exchange’s panel, and then the exchange can assign an ID to each algo. Registered algos can be used across brokers.

• Algo providers can separately join hands with the brokers by entering into agreements against particular fees or charges.
• Retail traders can also develop their algos and get those registered with the exchanges. This can help the retail traders who are interested in algo trading, but due to safety issues, haven’t gotten the confidence yet.
• For registering algos, retail traders can develop the algo themselves or with the help of tech vendors. 

Then he or she must provide the details to the brokerage house he or she is associated with. Then the broker will take the thing forward to the exchange and get the algo registered. Once the algo is registered, the broker will share the algo ID with the client.

In the same manner, the retail trader can modify the algo as well.

• All the algo orders will be tracked, and the details will be kept for five years. This is again for safety and audit purposes, irrespective of the system from which the algo order is fired. It can be an internet-based trading system, an API of the client or the vendor, or STWT platforms.
• In case of using multiple algos, all of them need to be mapped to a primary or a secondary static IP.
• A static IP can only be shared within the family. While it can be mapped only to one client, it is shared among the same family members.
• A static IP can be changed only once a calendar week if required. In case the client needs to change it more than once a week, he or she needs to reach out to the brokerage house.
• Brokerage houses will be monitoring the algo trading compliance standards
  

With due diligence as per the NSE circular. It will be the duty of the brokerage house to make sure there is no misconduct or violation of the securities laws. If there is any such incident, then the broker needs to immediately report the same to the stock exchange/s.    

• The stock exchanges will be monitoring and have surveillance over the entire system with SOPs for testing algos, real-time simulation testing, and surveillance, and a system to halt or destroy algos that are malfunctioning

Conclusion

While this has been long overdue, and SEBI and the stock exchanges have been working on it for a long time, finally, the standards are here. With these SEBI operational norms, stock exchange regulations, and brokerage houses monitoring the algo providers, the retail investors can participate in algo trading without fear.

Algo Trading | FAQs

Source: https://www.business-standard.com/

Disclaimer: Investments in the securities market are subject to market risks; read all the related documents carefully before investing.