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Business Standard
23-07-2025
- Business
- Business Standard
NSE issues retail algo trading rulebook, mandates strategy registration
With new norms taking effect for retail algorithmic (algo) trading from August 1, the National Stock Exchange (NSE) has released an operational rulebook aimed at fostering a safer and more transparent environment for traders using automated systems. The guidelines issued on Tuesday mandate the registration of all algo strategies, each of which will receive a unique identification (ID). Brokers will now be permitted to offer direct API access to their retail clients, though registration is mandatory. Further, it will be the brokers' responsibility to ensure that only eligible clients use the API or related facilities. For tech-savvy retail traders using their own algos, brokers will be required to disclose the PAN and unique client code of such clients. The application and registration of algo strategies must be done through a broker, with the algo ID allotted by the exchange. If there are more than 10 orders per second, the broker must register the algos developed by clients. Under the new framework, brokers will be held accountable for all orders routed through their terminals. The algo provider, in such cases, will act as an agent of the broker. The guidelines also prescribe several checks, including those related to price, quantity, order value, and position limits. This operational framework follows a circular issued by the Securities and Exchange Board of India (Sebi) in February, which sought to address grey areas in algo trading and ensure appropriate safeguards for retail participants. Market participants had called the guidelines necessary, citing the rise in retail participation and the growing share of algo trades. Algo trading is now widespread across both institutional and retail segments. Algo trading involves executing trades using pre-programmed strategies based on parameters such as price movements and volumes, allowing for automated buying or selling of securities. In FY25, the share of algo trading surged to 70 per cent in equity derivatives (notional turnover), according to the NSE Market Pulse report. Nilesh Sharma, executive director and president, SAMCO Securities, noted: 'These regulations bring much-needed clarity by clearly defining what qualifies as an algo strategy. Notably, low-frequency strategies—those generating fewer than 10 orders per second—are not classified as high-frequency algos. This distinction significantly reduces the compliance burden for retail users deploying simpler, rule-based systems, encouraging wider adoption of technology-driven trading in a responsible manner.' All algo providers will have to be empanelled with the exchange, except those that are in-house and provided by brokers. The turnaround time for empanelment has been set at T+30 working days, while strategy registration will be completed in T+10 working days. Registration for execution algos—where the logic is disclosed—will follow a fast-track process and be completed in T+7 working days. While registering for 'blackbox' or 'whitebox' algos, disclosures on the basic risk management system and an auditor certificate will be required. For blackbox algos—where logic is not disclosed—Sebi has mandated registration of the algo provider as a research analyst. Any change in the logic governing an algo will necessitate re-registration. 'Trading members providing API/algo provider facilities for routing client orders shall not be allowed to cross trades of their clients with each other. All orders must be offered to the market for matching,' the NSE guidelines added.
Mint
30-05-2025
- Business
- Mint
Investment of mutual funds in NSE firms touches a record high of 10 per cent: Report
The ownership of mutual funds (MFs) in listed companies scaled a record high of 10 per cent in fiscal 2025 and indicated the first double digit reading. In the March quarter, mutual funds infused ₹ 1.9 lakh crore into equities, contributing to a record annual net inflow of ₹ 6.1 lakh crore, reported Hindu Business Line. Passive funds within mutual funds also hit a peak share of 2 per cent. Individuals' holding, directly and through mutual funds, remained steady at a record high of 18 per cent of the market with a current holding of ₹ 74.5 lakh crore, a compounded annual growth rate of 17 per cent over five years, according to the NSE Market Pulse report released on Thursday. However, individual investors' direct ownership dipped to 9.5 per cent, suggesting growing popularity of MFs as a preferred vehicle for equity investment by retail investors. Akshat Garg, AVP, Choice Wealth, said individual investors are increasingly channelling incremental money into mutual funds and the shift has been structural, not cyclical, wrote Business Line. The surge in SIP flows, especially from tier-II and -III cities, reflects growing investor maturity, but at the same time, direct equity investing has become more volatile and time-consuming, prompting retail investors to delegate that complexity to fund managers, he added. Strong performance of Indian equities, coupled with rising participation, has resulted in a significant increase in household wealth over the last few years. 'Our estimates suggest that the household wealth in Indian equities increased by over ₹ 46 lakh crore in the last five fiscal years,' said the report. Since June 2021, with a strong SIP-led inflows, MF ownership in NSE-listed firms has climbed steadily, reaching all-time highs. Meanwhile, investors pumped money into debt mutual funds in April as they sought lower-risk options to ride out the market volatility and to rebalance their portfolios at the start of the financial year, taking net inflows into these funds to the highest in over two decades. Net inflows into debt-oriented open-ended mutual fund schemes were at ₹ 2.19 trillion in April—the highest since January 2005, from when this data is available. The net inflows marked a sharp reversal from March, when debt-oriented schemes witnessed outflows of ₹ 2.02 trillion. For all personal finance updates, visit here
