Introduction of Smart Order Routing
Summary
SEBI permits the introduction of Smart Order Routing in the Indian securities market based on proposals from stock exchanges. Stock exchanges must ensure brokers adhere to specific conditions regarding system audits, neutral routing, and best execution policies. The circular mandates that exchanges implement necessary safeguards, amend bye-laws, and report implementation status to SEBI.
Text
it has been decided to permit Smart Order Routing in Indian Securities Market.
Stock broker interested to offer Smart Order Routing facility shall apply to the respective stock exchanges.
Stock broker shall submit a third party system audit of its Smart Order Routing system and software.
An undertaking to the respective stock exchanges that Smart Order Routing shall route orders in a neutral manner.
Stock exchange shall communicate its decision to the broker within 30 calendar days of the date of receipt of application by the exchange.
Stock exchange shall ensure that brokers adhere to the best execution policy while using Smart Order Routing.
Smart Order Routing facility shall be provided to all class of investors.
Stock broker shall enter into a specific agreement with the client to provide Smart Order Routing facility.
Stock broker shall maintain logs of all activities to facilitate audit trail.
System audit of the Smart Order Routing systems and software shall be periodically carried out by the brokers as may be specified by the exchange.
Stock exchange shall ensure that Smart Order Routing is not used to place orders at venues other than the recognised stock exchanges.
The stock broker shall carry out appropriate validation of all risk parameters before the orders are placed in the Smart Order Routing system.
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Source: SecMarx — Introduction of Smart Order Routing. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.