Market regulator Securities and Exchange Board of India has given a sigh of relief to brokers who were undergoing regulatory action for being associated with algo trading platforms by announcing a settlement scheme for them.
NDTV Profit had reported on Nov 9, 2024, that several brokers are likely to settle and take advantage to such a scheme.
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The scheme is going to apply to brokers dealing with proceedings before the regulator and the Securities Appellate Tribunal. The idea here is to provide a route to the brokers to conclude these matters in an expeditious manner.
The timeline given by the regulator is from June 16 to Sept 16 and a detailed FAQ would be published on the SEBI website to explain the settlement process to all stakeholders. However, those who choose not to utilise the scheme will continue to face the regulatory proceedings for being associated with algo trading platforms.
The development follows a notice issued by SEBI last year to over 120 stockbrokers in connection with their involvement with Tradetron, which allows users to automate trading strategies.
SEBI's inquiry is centered around potential violations of its regulations, particularly a 2022 circular that prohibits brokers from partnering with platforms promising assured returns. Tradetron has reportedly been linked to some trading strategies that allegedly guaranteed profits, raising concerns of non-compliance with SEBI's stringent guidelines.
Brokerages named in the investigation include major players like Zerodha, Motilal Oswal Financial Services Ltd., Bajaj Financial Securities Ltd., and 5Paisa Capital Ltd. According to SEBI's regulations, specifically Regulation 9(f) of the SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992, brokers must adhere to a strict code of conduct, ensuring they do not associate with any entities offering guaranteed returns or engaging in potentially risky practices.
Several other prominent brokerages had also received notices from SEBI regarding their association with Tradetron. These include major firms such as Aditya Birla Money Ltd., ICICI Securities Ltd., HDFC Securities Ltd., IIFL Securities Ltd., Angel One Ltd., Paytm Money Ltd., Sharekhan Ltd., Upstox Securities Pvt., Geojit Financial Services Ltd., Fyers Securities Pvt., and many more.
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