Is algo trading legal in India?

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Is algo trading legal in India? There can be a
plethora of questions in a persons mind when
he/she is opting to optimize their investing
game by employing algo trading strategies. One of
the most common and sensible question that
arises in a persons mind is this is algo
trading legal? Would I be liable to legal
ramifications if I indulge in algo trading? Would
I end up losing my money? To be honest, these
fears are well founded, and any intelligent
person who is entering a new domain should be
worried about the safety of their assets. In this
article below, well try to settle these
questions with appropriate answers and hopefully,
make it easier for you to make a decision. Algo
trading refers to using computer-based algorithms
to make much more informed and less risky buying
and selling decisions. Of course, the algorithms
have to be written by humans and they need to be
approved by a CA before they can be implemented
in the software. Now to answer the question
about the legality of automated trading, we need
to look at institutional investors and retail
investors separately. Legality for Institutional
Investors The answer to the question of whether
or not algo trading is legal in India is yes.
In fact, it has been legal in the country since
the year 2008 when SEBI (Securities and Exchange
Board of India) passed a regulation making
automated trading legal in the country for
institutional investors. Ever since it was
legalized, it has risen rapidly in the past
decade so much, in fact that it contributes
nearly 43 of all the trades that happen on the
NSE (National Stock Exchange). SEBI has also
passed a set of guidelines for employing algo
trading strategies in the security market. SEBI
has also allowed for collocation facilities
among institutional investors, which means that
upon payment of a rent, the traders are allowed
to place their servers within the exchange
premises. This prevents latency, which can lead
to huge losses. Legality for Retail
Investors Currently, there are no particular set
of instructions or guidelines that have been
passed by SEBI for retail investors so there is
no answer to the above question whether or not
algo trading legal in India? According to SEBI,
allowing the retail investors to get involved in
algo trading would be like giving a nuclear
weapon to someone who hasnt even fired a gun in
all his life. However, if there is some retail
investor who aspires to be involved in algo
trading, he needs to get himself certified as an
Authorized Personnel he also needs to acquire a
dealer terminal from the broker that hes in
contact with. Also, the guy who is chosen to man
the terminal also needs to have a NISM Series
VIII certification. Even now, SEBI is in the
process of making the game fairer and give
everyone a chance at making huge profits
whether its an institutional investor or a
retail investor. The problem, however, is that
the retail investors scene is so decentralized
that things could go helter-skelter if everyone
is allowed to enter the algo trading at once.
The reason why SEBI is moving so cautiously is
because big money is at stake, given the large
volume of trades that happen through algo
trading. But hopefully, in time, SEBI will be
able to devise a policy that would give retail
investors a fair chance at making the most of
algo trading strategies.