Sebi Announces Settlement Scheme For Stockbrokers Facing Legal Action For Algo-Trading Violations

Sebi News: On June 9, the capital markets regulator, the Securities Exchange Board of India (Sebi), released a public notice. The market regulator mentioned in the notice that it has introduced a settlement scheme for stock brokers who are associated with select algorithmic trading platforms.

Notably, algorithmic trading or algo trading refers to a method of executing trades on the basis of pre-programmed instructions. These trades are executed automatically and the algorithms define the rules for the trade such as the time, price, and volume. Earlier in 2024 over 115 stockbrokers received a showcause notice from the Sebi for association with the algo marketplace Tradetron according to a report by Moneycontrol.

The scheme introduced by Sebi seeks to provide stock brokers who are linked with algo trading platforms against whom legal proceedings have begun an opportunity to seek a settlement with the Sebi under Section 15JB of the SEBI Act, 1992. Notably, Section 15JB of the SEBI Act, 1992, enables the market regulator to settle both administrative and civil proceedings initiated against individuals or entities. The settlement opportunity has been extended to all stock brokers linked with algo platforms against whom legal proceedings are currently pending before any authority or Adjudicating Officer (AO), Securities Appellate Tribunal or any other courts.

“The Securities and Exchange Board of India (SEBI) has decided to introduce a Settlement Scheme(hereinafter referred to as “the Scheme”) for all stock brokers associated with certain algo platforms in terms of Section 15JB of the SEBI Act, 1992 read with Regulation 26 of the SEBI (Settlement Proceedings) Regulations 2018,” Sebi said.

Stock brokers linked with the concerned algo trading platforms can seek settlement and an expedited conclusion to their proceedings. The Sebi added that other stockbrokers who are facing similar legal proceedings and do not avail the scheme.

However, Sebi clarified that actions initiated against stock brokers, who choose not to avail the settlement opportunity will continue under the normal course of the law.

As per the notice, stockbrokers can apply for the scheme starting June 16. The last date to apply for the scheme is September 16. Additionally, the market regulator will release a list of Frequently Asked Questions (FAQs) regarding the scheme on June 16 to assist stockbrokers.

“The Scheme shall commence on June 16, 2025, and end on September 16, 2025 (both days inclusive) or such other date as approved by the Competent Authority,” Sebi said in the notice.