Between Innovation and Safeguards: Analysing SEBI’s 2025 Algorithmic Trading Circular (Part I)

The Securities and Exchange Board of India recently introduced a framework for safer retail participation in algorithmic trading. The SEBI circular dated 4th February 2025 prescribed clear guidelines for intermediaries, such as stock exchanges and brokers, who deploy algorithmic trading software, recognising the possibility of increased risk, misuse, and manipulation. In this backdrop, the first part of the piece discusses the stipulations of the newly introduced guidelines. It further explains the rationale behind the introduction of this new algorithmic trading framework, which is to reinforce SEBI’s mandate of investor protection by safeguarding investors against the misuse, manipulation, and risks associated with ATS. This part also analyses the positive implications of these guidelines, which include enhancing accountability, developing a disclosure-based regime founded on transparency, mitigating structural risks, and professionalising the trading ecosystem. Therefore, it situates the new framework as a foundational regulatory intervention that strengthens investor protection while recalibrating accountability and transparency in India’s rapidly evolving algorithmic trading landscape.