Description

NSE reminds stock brokers to adhere to the phased implementation milestones for SEBI's algorithmic trading framework for retail investors, with penalties for non-compliance starting January 2026.

Summary

NSE has issued a reminder regarding adherence to the glide path provided by SEBI for implementation of the algorithmic trading framework for retail investors. The circular references SEBI’s original circular dated February 4, 2025 and subsequent extension circular dated September 30, 2025, which established a phased implementation approach with specific milestones. Stock brokers who fail to meet these milestones will be barred from onboarding new retail clients for API-based algo trading from January 5, 2026, and full compliance is mandatory for all brokers by April 1, 2026.

Key Points

  • SEBI’s original circular on safer participation of retail investors in algorithmic trading was issued on February 4, 2025
  • Implementation timeline was extended from August 1, 2025 to October 1, 2025, and then further extended with a glide path approach
  • Stock brokers ready with required systems went live from October 1, 2025
  • A phased glide path with three milestones was established for brokers requiring more time
  • Stock brokers failing to adhere to milestones will be barred from onboarding new retail clients for API-based algo trading from January 5, 2026
  • Full framework implementation is mandatory for all stock brokers from April 1, 2026
  • Stock exchanges are responsible for monitoring broker compliance with milestones

Regulatory Changes

The circular reiterates the implementation schedule for SEBI’s algorithmic trading framework:

  • Milestone 1 (by October 31, 2025): Retail algo product coming through API (in-house and through vendors) and at least one algo strategy shall be applied for registration with exchange
  • Milestone 2 (by November 30, 2025): Registration of retail algo products coming through API (in-house and through vendors) and few algo strategies for retail algo with exchange shall be completed
  • Milestone 3 (by January 3, 2026): Stock broker shall participate in at least one mock session with the new functionality which is complete in all aspects and provide evidence to exchanges

Compliance Requirements

For Stock Brokers:

  • Adhere to all three implementation milestones as specified in the glide path
  • Brokers not ready to go live from October 1, 2025 must provide information regarding number of existing clients as on September 30, 2025 to exchanges
  • Participate in at least one complete mock session by January 3, 2026 and provide evidence to exchanges
  • Ensure full compliance with algo framework from April 1, 2026

For Stock Exchanges:

  • Monitor compliance of stock brokers with stated milestones
  • Bring provisions to notice of members/participants and disseminate on websites
  • Put in place appropriate systems and procedures to ensure compliance
  • Make necessary amendments to relevant Bye-laws, Rules and Regulations
  • Communicate implementation status to SEBI in prescribed format

Important Dates

  • October 1, 2025: Go-live date for brokers ready with required systems
  • October 31, 2025: Milestone 1 deadline - Application for registration of at least one algo strategy
  • November 30, 2025: Milestone 2 deadline - Completion of registration of retail algo products and strategies
  • January 3, 2026: Milestone 3 deadline - Participation in at least one complete mock session
  • January 5, 2026: Brokers failing to meet milestones barred from onboarding new retail clients for API-based algo trading
  • April 1, 2026: Mandatory full implementation date for all stock brokers

Impact Assessment

Market Impact: This circular serves as a critical reminder for stock brokers to comply with the phased implementation of SEBI’s algorithmic trading framework. The framework aims to create a safer and more regulated environment for retail investors participating in algorithmic trading through APIs.

Operational Impact: Stock brokers must ensure their systems are aligned with the specified milestones to avoid penalties. Those failing to meet the January 3, 2026 deadline will lose the ability to onboard new retail clients for API-based algo trading from January 5, 2026, significantly impacting their business growth. Full compliance by April 1, 2026 is non-negotiable for all brokers offering algo trading services.

Compliance Impact: The phased approach with clear milestones provides structure but also creates compliance pressure. Stock exchanges are tasked with active monitoring, and brokers must maintain documentation and evidence of their progress through each milestone. This represents a significant regulatory shift in how algorithmic trading for retail investors is managed in Indian markets.

Impact Justification

High importance and impact due to mandatory compliance requirements for all stock brokers offering algo trading to retail investors, with specific penalties for non-adherence to milestones and full implementation deadline of April 1, 2026