SEBI Eases Algorithmic Trading Penalty Rules for High OTR

SEBI has revised its penalty framework for high order-to-trade ratios in algorithmic trading, exempting a broader range of equity options orders. The update follows feedback from exchanges and stakeholders, with relief aimed at market makers. The new rules are effective from April 6, 2026.

The Securities and Exchange Board of India (SEBI) unveiled new modifications to its penalty framework concerning high order-to-trade ratios (OTR) in algorithmic trading on Wednesday.

A key aspect of the revisions includes exemptions for certain categories of orders and market participants. Notably, orders placed within ±40% of the last traded price (LTP) of the premium, or ±Rs 20, will not attract penalties. This change renders most algorithmic trades in equity options free from the previous stringent OTR regulations.

The move aims to alleviate compliance burdens, especially for market makers whose activities necessitate frequent order placements. The revised framework is set to take effect on April 6, 2026, providing market stakeholders ample time to adapt to the new parameters.

(With inputs from agencies.)