Sebi modifies penalty framework for algorithmic trading, easing compliance for certain orders & market participants. New rules effective April 6, 2026.
The regulator has eased compliance for certain categories of orders and market participants.
The changes were finalised after taking into account representations from stock exchanges, deliberations with market stakeholders, and recommendations of Sebi’s Secondary Market Advisory Committee.
Under the revised framework, Sebi has decided to exempt a wider range of equity options orders from the penalty framework.
For equity option contracts, algorithmic orders placed within ±40 per cent of the last traded price (LTP) of the premium or ±Rs 20, whichever is higher, will no longer be considered while imposing penalties for high OTR.
“Orders placed within the range of ±0.75 per cent of the LTP shall be exempted from the framework for imposing penalty for high OTR. However, for equity option contracts, orders placed within the range of ±40 per cent of LTP (premium) or ± Rs 20, whichever is higher, shall be exempted from the framework for imposing penalty for high OTR,” Sebi said in its circular.
In addition, algorithmic orders placed by designated ‘Market Makers’ as part of their market-making activity will be excluded from the computation of OTR.
This move is expected to provide relief to market makers, whose role often involves placing and modifying a large number of orders to provide liquidity.
The OTR framework will continue to apply to orders placed in both the cash and derivative segments, including those under liquidity enhancement schemes, except for algorithmic orders by designated market makers.
The new framework will come into effect from April 6, 2026.