{"id":5647,"date":"2025-03-20T12:36:03","date_gmt":"2025-03-20T07:06:03","guid":{"rendered":"https:\/\/trending.niftytrader.in\/?p=5647"},"modified":"2025-03-20T12:36:03","modified_gmt":"2025-03-20T07:06:03","slug":"sebi-launches-settlement-scheme-for-brokers-in-algo-trading-violations","status":"publish","type":"post","link":"https:\/\/www.niftytrader.in\/markets\/sebi-launches-settlement-scheme-for-brokers-in-algo-trading-violations\/","title":{"rendered":"SEBI Launches Settlement Scheme for Brokers in Algo Trading Violations"},"content":{"rendered":"<h2 data-start=\"82\" data-end=\"181\">Over 110 Brokers, Including Zerodha, 5Paisa, and Motilal Oswal, Receive Show-Cause Notices<\/h2>\n<p data-start=\"183\" data-end=\"436\">Mumbai, India \u2013 The Securities and Exchange Board of India (SEBI) is preparing to introduce a settlement scheme for stock brokers who were served show-cause notices over their association with unregulated algorithmic trading platforms.<\/p>\n<p data-start=\"438\" data-end=\"661\">The move comes as SEBI looks to resolve the issue swiftly, preventing it from escalating into a prolonged legal dispute similar to the NSEL scam or illiquid options case, sources familiar with the matter revealed.<\/p>\n<h2 data-start=\"663\" data-end=\"703\">SEBI\u2019s Proposed Settlement Plan<\/h2>\n<ul data-start=\"705\" data-end=\"1275\">\n<li data-start=\"705\" data-end=\"868\">The settlement scheme will be presented before SEBI\u2019s board on March 24 as an information memorandum and is expected to be notified soon after.<\/li>\n<li data-start=\"869\" data-end=\"1057\">Low Settlement Costs: SEBI considers the violations to be an industry-wide issue rather than a major infraction, keeping the settlement amount between \u20b91-2 lakh per broker.<\/li>\n<li data-start=\"1058\" data-end=\"1141\">Application Process: Brokers must apply to SEBI to avail of the scheme.<\/li>\n<li data-start=\"1142\" data-end=\"1275\">Limited-Time Offer: The window will remain open for three months, with a possible extension depending on response levels.<\/li>\n<\/ul>\n<h3 data-start=\"1277\" data-end=\"1353\">Background: SEBI\u2019s Crackdown on Unregulated Algo Trading Platforms<\/h3>\n<p data-start=\"1355\" data-end=\"1436\">In 2023, SEBI issued show-cause notices to over 110 brokers, including:<\/p>\n<ul data-start=\"1438\" data-end=\"1517\">\n<li data-start=\"1438\" data-end=\"1453\">Zerodha<\/li>\n<li data-start=\"1454\" data-end=\"1476\">5Paisa Capital<\/li>\n<li data-start=\"1477\" data-end=\"1517\">Motilal Oswal Financial Services<\/li>\n<\/ul>\n<p data-start=\"1519\" data-end=\"1840\">This action followed SEBI\u2019s observation that several unregulated platforms were offering algo-based trading strategies with misleading claims of assured returns. These platforms, such as Tradetron, facilitated automated trading by linking algorithms to brokers\u2019 systems, violating SEBI\u2019s directives.<\/p>\n<h3 data-start=\"1842\" data-end=\"1887\">SEBI\u2019s Prior Warnings and Circulars<\/h3>\n<p data-start=\"1889\" data-end=\"1958\">SEBI has taken multiple steps to curb unregulated algo trading:<\/p>\n<ol data-start=\"1960\" data-end=\"2517\">\n<li data-start=\"1960\" data-end=\"2095\">June 2022: SEBI issued a public statement warning brokers against associating with unregulated algo trading platforms.<\/li>\n<li data-start=\"2096\" data-end=\"2517\">September 2022: SEBI released a circular titled \u201cPerformance\/Return Claimed by Unregulated Platforms Offering Algorithmic Trading Strategies\u201d, which:\n<ul data-start=\"2266\" data-end=\"2517\">\n<li data-start=\"2266\" data-end=\"2354\">Barred brokers from referencing past or expected returns of such strategies.<\/li>\n<li data-start=\"2358\" data-end=\"2443\">Prohibited collaborations with platforms that make assured return claims.<\/li>\n<li data-start=\"2447\" data-end=\"2517\">Mandated brokers to sever ties within seven days of detection.<\/li>\n<\/ul>\n<\/li>\n<\/ol>\n<p data-start=\"2519\" data-end=\"2681\">Despite these warnings, SEBI found that many brokers continued their affiliations with these platforms, leading to investigations and regulatory action.<\/p>\n<h3 data-start=\"2683\" data-end=\"2740\">New Regulatory Measures for Algorithmic Trading<\/h3>\n<p data-start=\"2742\" data-end=\"2906\">In response to the growing retail interest in algo trading, SEBI introduced new rules on February 4, 2024, to bring greater accountability to brokers:<\/p>\n<ul data-start=\"2908\" data-end=\"3171\">\n<li data-start=\"2908\" data-end=\"2990\">Brokers will now act as principals for algo trading executed via APIs.<\/li>\n<li data-start=\"2991\" data-end=\"3093\">Algo providers and fintech vendors must be empanelled with stock exchanges to operate legally.<\/li>\n<li data-start=\"3094\" data-end=\"3171\">Brokers are prohibited from onboarding non-empanelled algo providers.<\/li>\n<\/ul>\n<h3 data-start=\"3173\" data-end=\"3203\">Future Steps by SEBI<\/h3>\n<p data-start=\"3205\" data-end=\"3362\">Alongside the settlement scheme, SEBI is also working on a standardized enforcement mechanism to handle algo trading violations more transparently.<\/p>\n<p data-start=\"3364\" data-end=\"3557\" data-is-last-node=\"\" data-is-only-node=\"\">With SEBI\u2019s firm regulatory stance, the market is expected to see greater compliance among brokers, reducing risks for retail traders involved in algorithmic trading strategies.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Over 110 Brokers, Including Zerodha, 5Paisa, and Motilal Oswal, Receive Show-Cause Notices Mumbai, India \u2013 The Securities and Exchange Board of India (SEBI) is preparing to introduce a settlement scheme for stock brokers who were served show-cause notices over their association with unregulated algorithmic trading platforms. The move comes as SEBI looks to resolve the [&hellip;]<\/p>\n","protected":false},"author":4,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[615],"tags":[],"ppma_author":[1331],"class_list":{"0":"post-5647","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-stock-market-news"}," _eael_post_view_count":0,"authors":[{"term_id":1331,"user_id":4,"is_guest":0,"slug":"sourabh","display_name":"Sourabh Sharma","avatar_url":{"url":"https:\/\/trending.niftytrader.in\/wp-content\/uploads\/2025\/11\/Sourabh-Sharma.png","url2x":"https:\/\/trending.niftytrader.in\/wp-content\/uploads\/2025\/11\/Sourabh-Sharma.png"},"0":null,"1":"","2":"","3":"","4":"","5":"","6":"","7":""}],"_links":{"self":[{"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/posts\/5647","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/comments?post=5647"}],"version-history":[{"count":1,"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/posts\/5647\/revisions"}],"predecessor-version":[{"id":5649,"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/posts\/5647\/revisions\/5649"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/media\/5648"}],"wp:attachment":[{"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/media?parent=5647"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/categories?post=5647"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/tags?post=5647"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/www.niftytrader.in\/markets\/wp-json\/wp\/v2\/ppma_author?post=5647"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}