The Securities and Exchange Board of India on 2nd September 2022, issued a circular on performance/return claimed by unregulated platforms offering algorithmic strategies for trading’, casting certain responsibilities on Stock Brokers and Stock Exchanges. This circular is intended to protect the investors from falling prey to any kind of mis-selling being done by unregulated entities as well as to restrict the stock brokers from associating with any unregulated entities.
It has come to the notice of the Securities and Exchange Board of India (SEBI) that some unregulated platforms are offering algorithmic trading services/strategies to investors for automated execution of trades. Such services and strategies are being marketed with “claims” of high returns on investment. Further, “ratings” have been assigned to the strategies, which could lead to investors being lured by such claims. This may amount to mis-selling of such services and strategies to investors.
In order to prevent such acts and instances of mis-selling and to protect the interest of investors in the securities market, it has been decided that:
Stock Brokers who provide services relating to algorithmic trading shall not:
- directly or indirectly make any reference to the past or expected future return/performance of the algorithm; and/or
- directly or indirectly associate with any platform providing any reference to the past or expected future return/performance of the algorithm.
Stock brokers who are directly/indirectly referring to any past or expected future return/performance of an algorithm or are associated with any platform providing such reference, shall remove the same from their website and/or disassociate themselves from the platforms providing such references, as the case may be, within seven days from the date of this circular.
