Revised Location ID and Algo Order Identifier - 14th Digit Classification

Description

BSE revises the 14th digit identifier for dealer terminal registration to distinguish algo and non-algo orders, with mandatory compliance by January 31, 2026, and penalties for non-compliance.

Summary

BSE has revised the 14th digit identifier system used in dealer terminal Location IDs to better classify algo and non-algo trading orders. Trading Members must update their Location IDs by January 31, 2026. The 14th digits 1, 2, and 4 are now designated for algo orders (Algo Trading, Algo using SOR, and Inter-Exchange Algo respectively), while other digits indicate non-algo orders. Non-compliance with proper algo order tagging will result in escalating penalties starting at Rs. 20,000 per day and reaching Rs. 1,00,000 per day after 10 instances.

Key Points

• Revision of 14th digit identifier in Location ID registration for dealer terminals
• Three specific digits (1, 2, 4) designated as algo order identifiers
• Mandatory update deadline: January 31, 2026
• Escalating penalty structure for non-compliance with algo order tagging
• Different Location ID formats for various user types (IBT, STWT, DMA, etc.)
• Supersedes previous notices dated September 24 and 25, 2025

Regulatory Changes

Revised 14th Digit Classification

Old System:

• 0: No Prog Trading
• 1: Algo Trading
• 2: DMA
• 3: DMA Algo
• 4: SOR
• 5: Hand-Held Device
• 6: SOR with DMA
• 7: SOR DMA with Algo
• 8: Batch

New System:

• 0: Non Algo Trading
• 1: Algo Trading
• 2: Algo using SOR
• 3: Non Algo SOR
• 4: Inter Exchange Algo
• 5: RMS Square Off
• 6: AMO
• 7: Basket
• 8: (Reserved)

Algo Order Definition

The following 14th digit identifiers are classified as algo orders:

• 1: Algo Trading
• 2: Algo using SOR
• 4: Inter-Exchange Algo

Location ID Structure by User Type

Applicable Vendor Code: 99

Compliance Requirements

For Trading Members

1. Update Location IDs: Register dealer terminals with appropriate 14th digit identifier based on trading type (algo vs non-algo)
2. Compliance Deadline: Complete all Location ID updates by January 31, 2026
3. Proper Classification: Ensure all algo orders use digits 1, 2, or 4 in the 14th position
4. Avoid Non-Compliance: Properly tag unique identifiers for algo orders to avoid penalties
5. Reference Materials: Use the provided table for Location ID registration guidance
6. Contact Helpdesk: Reach out for clarifications on implementation

Penalty Structure (per Circular 20251010-4)

For non-compliance related to non-tagging of unique identifiers for algo orders:

• First instances: Rs. 20,000 per day
• After 3 instances: Rs. 50,000 per day
• After 10 instances: Rs. 1,00,000 per day (for incremental instances)

Important Dates

• Circular Date: December 23, 2025
• Compliance Deadline: January 31, 2026 (mandatory update of 14th digit order identifier)
• Reference Notices: September 24, 2025 (Notice 20250924-54) and September 25, 2025 (Notice 20250925-4)
• Penalty Circular: October 10, 2025 (Circular 20251010-4)

Impact Assessment

Operational Impact

High Impact on Trading Members:

• All Trading Members must review and update their dealer terminal registrations
• Requires coordination across operations, compliance, and technology teams
• System changes may be needed to ensure correct 14th digit assignment
• Approximately 5 weeks until mandatory compliance deadline

Technology Impact

• Order management systems must correctly populate the 14th digit based on order type
• Risk management systems need to validate algo order classification
• Trading platforms must support the new identifier scheme
• Testing required to ensure proper implementation before deadline

Compliance Risk

Significant Financial Penalties:

• Daily penalties can escalate quickly to Rs. 1,00,000 per day
• Multiple dealer terminals increase compliance complexity
• Non-compliance tracking is cumulative across instances
• Financial impact can be substantial for firms with high trading volumes

Market Impact

• Better regulatory oversight of algorithmic trading activity
• Improved market surveillance capabilities for BSE
• Enhanced transparency in distinguishing algo vs non-algo orders
• Standardization aligns with industry best practices

Segments Affected

• Equity (EQ)
• Equity Derivatives (EQD)
• Currency Derivatives (CDX)
• Bond Currency Exchange (BCX)
• Electronic Gold Receipts (EGR)

Impact Justification

Critical operational change affecting all trading members with strict compliance deadline and significant penalties (up to Rs. 1,00,000 per day) for non-compliance with algo order tagging requirements.