Performance/return claimed by unregulated platforms offering algorithmic strategies for trading
Summary
SEBI prohibits stock brokers from referencing past or expected future returns of algorithmic trading strategies. Stock brokers must disassociate from platforms making such claims and remove existing references within seven days. Stock exchanges are directed to implement these provisions, monitor compliance, and submit reports to SEBI.
Text
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.
take necessary steps and put in place necessary systems and procedures for implementation of the above provisions;
make necessary amendments to the relevant bye-laws, rules and regulations for the implementation of the above provisions;
bring the provisions of this circular to the notice of stock brokers and disseminate the same on their website;
monitor compliance of this circular by taking confirmation from stock brokers that they are compliant with clause 4.1 and 4.2 of this circular along with the proof of the same; and shall submit a compliance report to SEBI in this regard within 60 days from the date of this Circular.
The provisions of this circular shall be applicable with immediate effect.
Appropriate action may be taken by SEBI under the securities laws for non- compliance of the above provisions.
This circular is issued in exercise of powers conferred under Section 11(1) of the Securities and Exchange Board of India Act, 1992, to protect the interests of investors in securities and to promote the development of, and to regulate the securities markets.
Source: SecMarx — Performance/return claimed by unregulated platforms offering algorithmic strategies for trading. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.