Definition
SEBI Algo Approval
SEBI algo approval refers to the regulatory framework under which algorithmic trading strategies must be vetted and authorised by the exchange before deployment, with unique identification and audit trails.
In India, every algo strategy a broker deploys must be approved by the exchange, assigned a unique strategy ID, and accompanied by controls such as price and quantity limits and a kill switch. This pre-deployment vetting is meant to prevent rogue algos from destabilising the market.
SEBI has extended the framework to retail algos, requiring that algos be routed through brokers, that API-based algos be registered, and that algo providers be empanelled with exchanges. The objective is supervised, accountable automation, with clear responsibility for each algo's behaviour and a trail for post-event investigation.
Related terms
- Algorithmic TradingAlgorithmic trading is the use of computer programs that follow pre-defined rules on price, timing, quantity and other variables to place and manage orders automatically, with little or no human intervention per order.
- API TradingAPI trading is the placement and management of orders programmatically through a broker's application programming interface, enabling automated and algorithmic strategies without manual screen-based input.
- Order-to-Trade Ratio (OTR)The order-to-trade ratio measures the number of orders (including modifications and cancellations) a participant submits relative to the number of actual trades executed, used to police excessive messaging.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.