The Securities and Exchange Board of India (SEBI) on Monday announced a settlement scheme for stock brokers currently under regulatory scrutiny for collaborating with unregulated algorithmic (algo) trading platforms.

The settlement scheme will allow these brokers to settle and conclude the proceedings. The application window will be open from June 16 to September 16, 2025. Brokers who don’t participate will face the continuation of legal or regulatory action.

“The scheme would provide a settlement opportunity to such stock brokers associated with certain algo platforms, against whom proceedings have been initiated by SEBI and are pending before any authority or forum — viz., the Adjudicating Officer, the Securities Appellate Tribunal, or courts,” SEBI said.

The settlement amount is expected to remain low around Rs 1 lakh per broker, according to a source aware of the discussions. An FAQ is expected to be released on June 16 to help brokers through the application process.

The regulator had issued show-cause notices to more than 100 stock brokers, including major players like Zerodha, 5Paisa Capital and Motilal Oswal Financial, after finding out that unregulated platforms were offering algo-based trading strategies promising assured returns.

The brokers allegedly allowed the application programming interfaces of algo providers such as TradeTron to facilitate these trades for their clients. According to SEBI’s regulations, brokers must stick to a strict code of conduct and not associate with any entities offering guaranteed returns or any risky practices.

Following these findings, the regulator tightened algo trading regulations to make it safer for retail investors by mandating empanelment of algo providers and clearly defining the responsibilities of brokers and stock exchanges in monitoring and supervising algo platforms.

Published on June 9, 2025