Description

SEBI extends the implementation timeline for algorithmic trading framework with phased milestones from October 2025 to April 2026, providing a glide path for stock brokers to complete system changes.

Summary

SEBI has extended the implementation timeline for the algorithmic trading framework for retail investors, originally scheduled for October 01, 2025. The circular provides a phased glide path with three key milestones between October 2025 and January 2026, with full implementation mandatory from April 01, 2026. Stock brokers ready with required systems can go live from October 01, 2025, while others must complete registration and testing by specified dates or face restrictions on onboarding new retail clients for API-based algo trading.

Key Points

  • Original circular on safer participation of retail investors in algorithmic trading was issued on February 04, 2025
  • Implementation timeline was previously extended from August 01, 2025 to October 01, 2025
  • Exchanges issued detailed operational modalities on July 22, 2025 with clarifications and modifications in September 2025
  • Stock brokers ready with systems can go live from October 01, 2025
  • Three milestones established for brokers requiring more time to implement system changes
  • Stock brokers failing to meet milestones will be barred from onboarding new retail clients for API-based algo trading from January 05, 2026
  • Full compliance mandatory for all stock brokers from April 01, 2026
  • Stock exchanges directed to monitor broker compliance with milestones

Regulatory Changes

The circular modifies the implementation approach from a single hard deadline to a phased glide path:

Previous Timeline:

  • Original deadline: August 01, 2025
  • First extension: October 01, 2025

New Phased Approach:

  • Voluntary go-live: October 01, 2025 for ready brokers
  • Mandatory milestone-based implementation: October 2025 to January 2026
  • Universal mandatory compliance: April 01, 2026

Operational Modalities:

  • Detailed operational modalities issued by exchanges on July 22, 2025
  • Clarifications and modifications issued in second fortnight of September 2025
  • Implementation standards to be followed as per exchange specifications

Compliance Requirements

For Stock Brokers Ready to Implement:

  • May go live with the new framework from October 01, 2025

For Stock Brokers Requiring More Time - Mandatory Milestones:

Milestone 1 (by October 31, 2025):

  • Apply for registration of retail algo product coming through API (in-house and through vendors)
  • Apply for registration of at least one algo strategy with the exchange

Milestone 2 (by November 30, 2025):

  • Complete registration of retail algo products coming through API (in-house and through vendors)
  • Complete registration of few algo strategies for retail algo with exchange

Milestone 3 (by January 03, 2026):

  • Participate in at least one mock session with new functionality
  • Mock session must be complete in all aspects
  • Provide evidence of participation to exchanges
  • Exchanges will maintain calendar for mock sessions for testing of algos
  • Non-participation to be intimated to exchange

Reporting Requirements:

  • Stock brokers not ready from October 01, 2025 must provide information on number of existing clients as on September 30, 2025 to exchanges in specified format

Stock Exchange Obligations:

  • Monitor compliance of stock brokers with stated milestones
  • Bring provisions to notice of members/participants
  • Disseminate circular on their websites
  • Put in place appropriate systems and procedures for compliance
  • Make necessary amendments to Bye-laws, Rules and Regulations

Important Dates

  • September 30, 2025: Circular issuance date; cut-off date for existing client count reporting
  • October 01, 2025: Ready stock brokers can go live with new framework
  • October 31, 2025: Milestone 1 - Application for registration of API products and at least one algo strategy
  • November 30, 2025: Milestone 2 - Completion of registration of API products and algo strategies
  • January 03, 2026: Milestone 3 - Participation in at least one complete mock session
  • January 05, 2026: Penalty effective date - brokers failing milestones barred from onboarding new retail clients for API-based algo trading
  • April 01, 2026: Universal mandatory compliance date - algo framework applicable to all stock brokers

Impact Assessment

Market Impact:

  • Provides flexibility to stock brokers and algo vendors requiring additional time for system implementation
  • Phased approach reduces market disruption and allows orderly transition
  • May create temporary market segmentation between brokers going live early and those using glide path

Operational Impact:

  • Stock brokers must allocate resources to meet three distinct milestones over 4-month period
  • Algo vendors supporting multiple brokers face coordinated implementation timeline
  • Exchanges must establish monitoring systems for milestone compliance and mock session calendars
  • Brokers missing milestones face business restriction (inability to onboard new retail API algo clients from January 05, 2026)

Investor Impact:

  • Retail investors using API-based algo trading will experience gradual implementation across brokers
  • Enhanced safety framework aims to protect retail investors in algorithmic trading
  • Investors with brokers delaying implementation may face temporary service limitations

Compliance Impact:

  • High compliance burden on stock brokers to meet sequential milestones
  • Significant penalty for non-compliance (restriction on new client onboarding)
  • Clear accountability established through exchange monitoring and evidence requirements
  • Universal compliance mandatory from April 01, 2026 eliminates long-term exemptions

Impact Justification

High importance and impact due to mandatory compliance requirements affecting all stock brokers offering API-based algo trading to retail investors, with specific milestones and penalties for non-compliance including restriction on onboarding new clients.