SEBI released a circular giving a stern warning to unregulated platforms offering algorithmic strategies and also to stock brokers who are promoting such entities.
Stock Brokers who provide services relating to algorithmic trading shall not :
directly or indirectly make any reference to the past or expected future return/performance of the algorithm
directly or indirectly associate with any platform providing any reference to the past or expected future return/performance of the algorithm.
Stock brokers who are directly/indirectly referring to any past or expected future return/performance of an algorithm or are associated with any platform providing such reference,shall remove the same from their website and/disassociate themselves from platforms providing such references, as the case may be,within seven days from the date of this circular
People lose their minds once they start projecting future compounded multibagger returns and then forget about risk
As a negative, genuine algo creators - if they exist - may not be able to give reasonable estimate of risk/return. But they were likely getting overshadowed by non genuine algos projecting fake unrealistic/optimized returns.
There might have been a tendency/pressure among all algo creators to project high returns in order to capture attention.
Another layer of rules could be added to make broker+algo platform/creator accountable for execution failures. Have heard multiple times of failures in tradetron.
And perhaps encourage more skin in game by mandating creators/brokers to put their own money where their mouth is.
That’s a good thing. It will make people refrain from thinking that Algo trading is the only source of income. It will also keep the “greed” of brokers to sell such services at bay.