INDIA Law and Practice Contributed by: Shilpa Mankar Ahluwalia, Himanshu Malhotra and Purva Anand, Shardul Amarchand Mangaldas & Co
7.3 Regulatory Distinction Between Funds and Dealers Currently, the regulations do not distinguish between funds and dealers in the algorithmic trading space. 7.4 Regulation of Programmers and Programming The regulatory framework governing the trading algorithms and other electronic trading rules lays down the following obligations on programmers: • all algorithmic orders be tagged with a unique identifier provided by the stock exchange in order to establish an audit trail; and • the testing procedures which are to be fol - lowed by market participants before deploy - ment of software and algorithms. Entities undertaking insurance business in India are required to be registered as an insurer or an insurance intermediary with IRDAI. The under - writing processes to be undertaken by insurers and insurance intermediaries are specified by IRDAI and include making appropriate disclo - sures on costs, expenses and charges payable on insurance policies, rates, terms and con - ditions of the policy, and audit and reporting mechanisms. 8.2 Treatment of Different Types of Insurance Different kinds of insurance business are sub - ject to different regulatory frameworks. Broadly, insurance business may be categorised into two main categories: life insurance and general insurance. General insurance further includes 8. Insurtech 8.1 Underwriting Processes
providing clear guidelines on application-based trading, recognising it as a legitimate practice and setting guardrails around actions taken by stock brokers. The Retail Algo Circular is effec - tive from 1 August 2025. Under the Retail Algo Circular, an algorithmic trading strategy needs to be registered with the stock exchanges if the trading frequency is above the prescribed threshold. Algo providers need to register white box solutions with the stock exchanges, where - as the algo provider needs to obtain a research analyst licence from SEBI for offering black box solutions. These obligations are targeted at stock exchang - es (except for commodity derivatives exchang - es) in the country. The recent Retail Algo Circu - lar also places obligations on the stock brokers. Recent SEBI trends have been towards relaxing the OTR and orders per second (OPS) limits. SEBI also released a notification banning mis- selling of algorithmic strategies by making refer - ences to past performance or expected returns. These circulars cumulatively constitute the key regulatory framework governing high-frequency and algorithmic trading. 7.2 Requirement to Be Licensed or Otherwise Register as Market Makers When Functioning in a Principal Capacity The Guidelines for Market Makers (Market Mak - er Guidelines) require market makers to regis - ter with the stock exchanges per the relevant requirements notified by the stock exchanges. Generally, any member of a stock exchange is eligible to act as market maker provided the cri - teria laid down by the exchange are met.
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