I have created Options Strategy Analyser, Strategy Builder & Execution tool to execute option strategies, adjust them. This tool also has option simulator built-in.
It can be hosted on user machine or cloud for specific user. This was created for my personal use from last 2 years, now lot of people requesting to sell this to them.
My queries:
I want to sell this tool as a technical solution to let user connect to brokers APi (using client provided API keys ) and fetch the realtime data & feeds, and execute strategies.
Do I need to procure any permissions from SEBI or NSE?
i think you need to take some permissions and follow the regulations. nowadays sebi is very stringent and cautious in such matters where something is being sold to retail traders specially
Thanks for the replies. I am not able to find any proper answer to this question anywhere. I see many are selling algo/trade automation softwares without mentioning if they had taken any license from SEBI etc.
It still seems to be a grey area.
@nithin if you could help here and let us know what sort of compliance/license needed for Algo trading softwares.
This is about selling Algo tools/softwares as a pure technology platforms (to be installed on users machine) connected through broker’s API (users pays for the API subscription/free apis).
This is a regulatory grey area. I had written on this Algo topic some time back.
If you are selling a tool that helps people build strategies, I think it should be okay to sell it without any permission. But if you sell the strategy, it is, in a way acting like an advisor. Instead of human advising, the program is advising. Hence, this strategy must be approved by the exchanges, which can be done only through the broker. But today, it is impossible for a broker to ensure that a strategy firing order is the same that is being approved. So, I doubt if any broker will put their head on the table and get a strategy/algo approved that the broker themselves are not running.
If my tool help users to build historical data at their end by fetching the candle data from the brokers API (using client provided api key and secrets), will that be allowed?
I am planning following features (other than what already mentioned in my original post):
User can select an instrument and trading date from the UI, tool will fetch 1 - minute candle data for selected expiries and store the data locally on user’s machine or user provided Virtual machine instance in a database eg Postgres/MySql.
My tool will provide simulation interface ie move forward and backward in history by 1,2,3,5,15,30,60 minutes time frame so that user can test out various strategies.
There will not be any automatic import of candle data, it will always be user initiated.
User will be in full control of the imported candle data. No one other than use will have access to this data.
Tool can expose a websocket server so that user can build an interface on top of it eg Excel sheet/web UI to consume the historical data, move in history. Basically an abstraction of live feed but source would be historical data.
This data will not be locked/encrypted, if user wants to delete this data, he can do that.
From the regulation point of view will that be allowed?
If you are selling this tool to an end user who is using it for their own purpose, then I don’t really see any regulatory issue with this. There are many tools that already exist today.
But if you start displaying this on your website/app or if your end user does the same, then it is not allowed without first registering as a data vendor with the exchanges.