"Brokers have been asked to stop giving access to open APIs if they do not know where it is being used. Currently, there are a number of strategies used by clients using open APIs, which are not tracked by brokers nor approved by exchanges.
“Most of the algo trading happening today is on open API platforms, which is a concern. This allows you to execute a trade without a mobile app or a trading platform. Traders can create algo strategies that are not approved or known to the broker. The concern is that these algos may be wrongly triggered and create a price distortion in the market,” said a broking official.
An open API is a publicly available application programming interface that provides developers with access to a software application or web service."
Does this mean the support or possibility of API for traders will end soon if SEBI decides so?
If Z has 1.5%, others could have ~3-5%. Its may not be that significant yet, but I think they want the onus to be on the individuall(self-run) or atleast have the individual only go through regulated entities.
I guess the “Order_Source” column populates it with values “XXXX_TRADEAPI”. But you are right - the API service provider’s name is missing, its only a flag saying its an API order.
Once regulation sets in, the name of the “service provider” may be captured for audit trail.
Some of us do not use external tools/algos and use own own and so do not bring risks of clustering of orders and the like.
Please make sure that we are given some space too when providing feedback to regulator.
api is not unregulated platforms always.
I don’t know if the source of this article is legit. But this is an overkill by regulators. Just to kill a mosquito you can’t burn the entire house down. even If they ban api access completely who is to say where are orders exactly from even if they come through mobile apps or web app. Anyone else can be using it. I This needs to be settled for once and all. How can they go backwards on automation just because their are few elements selling automated strategies. Personally i use automation for order placement. I don’t want to go to primitive methods of using manual order placements . I think even if it gets banned people will start scraping and automating. Sebi really needs to think it through than just taking blanket approach for everything.
I don’t exactly get the implications of above link on api use for personal use that does not use external algo/tools.
Please give feedback to SEBI to try to let us be.
As the SEBI enforces the regulations on algo trading, all open APIs where the broker is unaware of the information about where it is being used by the client would be stopped on an immediate basis. Under the proposed regulations, the broker must be aware of the source of the order at all times.
Only this paragraph seems to be relevant. Not clear what they mean by ‘where’. I am sending orders from my address. Will that be enough as a declaration ?
Otherwise, this means that retail users will only have option to use algo providers and not be able to manage themselves which is discriminatory. I have absolutely no interest in outsourcing risk to third party algos/tools.
I had written to them earlier, there are workaround ways to automate too, less reliable and we will be forced to start using that. I used to send orders via NEST through ahk automation long ago. It was reliable enough ( apis are always better) but slower and more tedious and could break on GUI changes. Please lets not go back there.
Making algo providers register / provide data / dont advertise false returns is good ofc but compliance should not be by banning everyone else.
One positive from link seems to be that they will allow execution algos. Not sure if its different from now, lets see.
Interesting, but I assume the per order value is way more for API traders.
I hope, nothing will be impacted for people like me. I have my own system to place orders via API. I create the system myself and use it only for myself.
I provide liqudity to the market, I reduce inefficiencies in the market. People like me are very important to make the markets better. I hope Nithin sir, you will raise this point to SEBI, and protect API for normal users.
@nithin Sir, what is your opinion on this? Do you support API algo traders who wrote their own code? If yes, please let us know and are you supporting our voice reach to SEBI?
It seems really stupid, If SEBI bans people who wrote their own code to place orders.
The moneycontrol article is vague on this. But the person (Dharrmik) who spoke to SEBI directly, says SEBI is planning to ban people who wrote their own code.
I don’t see the logic and I don’t know how this will improve the market efficiency. I am an algo trader, and I help make the markets efficient, which is beneficial for me and everyone else.
If SEBI bans people who wrote their own code: I need to do one of these 3 things:
1.) Write unofficial code to place order
2.) Employ 20-30 people, and my code tells them in real time about the company, quantity, price, buy/sell order type, and they place order manaully.
3.) Buy NSE Co-location and do algo trading there, if it is allowed.
I trade mostly in equity, I help make stock market more efficient. Whatever I am doing with Zerodha API Is not harming anyone.
1st and 2nd option seems stupid. Should I already start working on 3rd option, If the ban is coming? So my trading won’t stop. Swtiching to Co-location should take a lot of months. I am earning in 9 figures yearly, so I guess I can afford this. But my statergy are not extreme latency sensitive, so I am not considering co-location for now. But my statergy needs orders to be executed between 200-500ms, so I still need API access. i can’t trade manually
He is an interested party (strategy/platform provider). His perception might be colored…
I didnt get the feeling (from what I read) that they want to ban all self-use of API.
Both these points point to the issue of “advertised” algos which in the event of a misfire can create serious market trouble. But I really don’t understand why the focus on individual traders with their custom programs? for example i don’t even use an algo I just use the API in my system where when i want to trade i just type in shorthand what i want and the trade all details and this is executed immediately … I don’t want a primitive method of having to look through instruments and finding the right one … I like my system and my accountability. No thank you I just don’t trust any algo strategy someone else has written even if it has the certificate from SEBI on compliance. Sorry!
I’ll summarise the regulators’ concerns in general apart from ready-made strategies from algo platforms-
Currently, all APIs offered by brokers are open, this cannot continue and the regulators will want to know the source of the order. This would require API orders coming in to be tagged with the algo ID.
The current algo registration process was created keeping HFT strategies in mind that usually have a post-trade RMS to reduce latency. Exchanges are working on a process to simplify this to cover retail algorithms/systematic order execution.
Disclosure of risks, adequate RMS checks, rate limits on order flow, etc being informed to the retail user before they enter into algorithmic trading.
