SEBI Proposes Overhaul Of Stock Broker Regulations

Market regulator, Securities and Exchange Board of India, on Wednesday, proposed a set of amendments to update stock broker regulations. One of the key proposals is the inclusion of a definition for “Algorithmic Trading” in the regulations. SEBI noted that while it has issued broad guidelines on the subject through various circulars, the term has not yet been defined in the core regulations.

It has now proposed to define algorithmic trading as any order generated or placed using automated execution logic. The suggestions were proposed by a working group set up for the review that comprised the exchanges, broker representatives, legal experts, academicians, and investor association.

The aim was to simplify language, remove inconsistencies, eliminate redundant provisions, and incorporate developments in market practices and the regulatory environment. The proposals were deliberated by SEBI’s Intermediary Advisory Committee before being placed for public consultation. The regulator has also proposed changes in the definition of ‘Professional Clearing Member’.

The current definition prohibits PCMs from having “trading rights” in the exchange where they are registered, but the broad meaning of “trading rights” has caused ambiguity. SEBI proposes clarifying the restriction while ensuring PCMs cannot engage in trading activity in that exchange. Meanwhile, such a professional will continue to have trading rights as an investor.

SEBI has proposed to align provisions such that the turnover of a stock broker who buys, sells, or deals in securities through a subsidiary that is itself a registered stock broker on another exchange is excluded from the subsidiary’s turnover only if the broker has paid five years of turnover-based fees plus a fee for an additional block of five years to the concerned exchange. The regulator is open to suggestions on these proposals till until Sept. 3, 2025.