Algo trading is already prevalent in India among both institutional as well as retail investors. However, existing regulations had several loopholes

The Securities and Exchange Board of India, by announcing the move, aims to cater to increased demand from retail investors for algorithm trading. The agency had earlier raised concerns over emergence

The new SEBI framework expands on the 2012 guidelines on Algorithmic Trading, a mechanism to automatically purchase and sell stocks.

India's markets regulator on Tuesday introduced rules for the approval and tracking of the use of algorithmic trading by retail investors to protect them amid rising demand. Algo trades use computer programs to execute trades and have advantages such as faster order execution and reduced transaction costs.

As the regulator tightens rules, experts say it will increase compliance burden and operational costs for algo traders

Capital markets regulator Sebi on Tuesday facilitated the participation of retail investors in algorithmic trading (algo trading), which provides advantages of faster order execution and improved liquidity.

Sebi has introduced a framework to allow retail investors to participate in algo trading safely. Mint explains what the regulations mean for retail investors and what steps are being taken to prevent potential risks such as market disruptions or unauthorized trades.