The National Stock Exchange (NSE) has introduced new rules to promote safe participation of retail investors in algorithmic (algo) trading, in line with recent guidelines from the Securities and Exchange Board of India (SEBI).
A circular released on Monday outlines the rules for all algo systems developed by stockbrokers, algo providers, and clients.
As per the circular, stockbrokers can provide clients with access to their trading systems through an API (application programming interface).
Clients must provide a static IP address to the stockbroker, which will be linked to the API tools.
Order Limit of 10 Per Second
This key will connect to the broker’s trading platform. Additionally, all API sessions must log out before the start of each trading day.
NSE has set an initial limit of 10 orders per second for algo trading, but this limit may be adjusted if necessary.
The circular stated, “The order limit will initially not exceed 10 orders per exchange/segment. Exchanges may adjust it as needed, and the market will be informed in advance.”
Brokers can set individual order limits for clients, but these must not exceed the prescribed limit.
If a client wishes to place more than 10 orders per second, they will need to register their algorithm with the exchange.
NSE mentioned that exchanges will establish a simple registration and compliance system for orders within a certain limit.
Algo providers must register and be listed with the exchange. If a broker collaborates with a registered algo provider, they must thoroughly investigate the provider to ensure they are not involved in any misconduct or violation of securities laws.
