SEBI proposes definition for algorithmic trading, changes to broker rules

Mumbai, Aug 13 (IANS) The Securities and Exchange Board of India (SEBI) on Wednesday proposed several changes to update stock broker regulations, including a clear definition for “algorithmic trading.”

The market regulator said that although it has issued guidelines on algorithmic trading through circulars in the past, the term has never been formally defined in the regulations.

SEBI has now suggested defining algorithmic trading as any order generated or placed using automated execution logic.

“The following definition of ‘Algorithmic Trading’ is proposed to be inserted: Algorithmic Trading means any order generated/placed using automated execution logic,” the market regulator said.

The proposal comes from a working group that included representatives from stock exchanges, brokers, legal experts, academicians, and investor associations.

The review aimed to simplify regulatory language, remove inconsistencies, eliminate outdated provisions, and incorporate changes in market practices.

These recommendations were discussed by SEBI’s Intermediary Advisory Committee before being released for public feedback.

The regulator has also suggested changes to the definition of ‘Professional Clearing Member’ (PCM).

Currently, PCMs are not allowed to have “trading rights” in the exchange where they are registered, but the meaning of this term has caused confusion.

SEBI wants to clarify that while PCMs cannot engage in trading activity in that exchange, they can still have trading rights as investors.

“Presently, as per existing regulation 2(1)(ae), the term Clearing member means a person having clearing and settlement rights in any recognised clearing corporation and shall include any person having clearing and settlement rights on a commodity derivatives exchange,” the market regulator said.

“Provided that such a clearing member in commodity derivatives exchange shall be required to become a member of a recognised clearing corporationfrom such date as may be specified by the Board,” it added.

Another proposed change relates to the turnover calculation of stock brokers operating through subsidiaries that are registered on other exchanges.

SEBI has recommended that such turnover should be excluded from the subsidiary’s turnover only if the broker has paid turnover-based fees for five years, along with fees for an additional five-year block, to the relevant exchange.

The regulator is inviting public comments on these proposals until September 3.

--IANS

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