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In a significant regulatory update, the Securities and Exchange Board of India (SEBI) has extended the deadline for its Settlement Scheme related to unauthorized associations with certain algorithmic trading platforms. Initially set to close on September 16, the scheme will now remain open until October 16, 2025. This extension offers a crucial window for brokers and market participants facing regulatory scrutiny to resolve pending cases without prolonged litigation.
The scheme is aimed at brokers who were found to be linked with unregulated algo platforms—many of which allegedly promised assured returns to retail investors, violating SEBI’s core principles of fair market conduct. With over 100 brokers reportedly under investigation, this extension is expected to ease compliance pressure and promote a culture of accountability.
Key Highlights Of The Extension Announcement
- SEBI has extended the Settlement Scheme deadline to October 16, 2025
- The scheme targets brokers associated with unauthorized algo platforms offering guaranteed returns
- It allows settlement of cases pending before SEBI’s Adjudicating Officer, Securities Appellate Tribunal, or courts
- Brokers can now apply for settlement through SEBI’s online portal within the extended timeframe
- The scheme is part of SEBI’s broader effort to clean up the misuse of algorithmic trading tools in retail markets
Background To The Regulatory Action
The rise of algorithmic trading platforms in India has brought both innovation and risk. While algo trading enhances speed and precision, its misuse—especially by platforms not registered with SEBI—has triggered serious concerns. Many such platforms were found to be offering automated strategies with misleading claims of assured profits, often bypassing regulatory oversight.
In 2022, SEBI issued warnings to brokers to sever ties with these platforms. However, investigations revealed continued associations, leading to show cause notices and enforcement actions. The Settlement Scheme was introduced in June 2025 to offer a structured resolution mechanism for these violations.
Eligibility And Settlement Terms
The scheme is open to brokers who:
- Have received notices for associating with unauthorized algo platforms
- Are facing proceedings under SEBI’s adjudication framework or in appellate forums
- Wish to settle without admitting guilt but agree to pay a one-time settlement amount
While SEBI has not officially disclosed the settlement fee, industry sources suggest a uniform amount of Rs 1 lakh per broker, subject to final confirmation. The scheme is designed to expedite resolution, reduce litigation backlog, and reinforce SEBI’s commitment to investor protection.
Why This Extension Matters
The extension reflects SEBI’s pragmatic approach to enforcement. By offering additional time, the regulator acknowledges the operational and legal complexities brokers face in compiling documentation and submitting applications. It also signals SEBI’s intent to encourage voluntary compliance rather than pursue prolonged punitive action.
For brokers, this is a chance to close regulatory chapters and restore credibility. For the market, it’s a step toward greater transparency and ethical use of technology.
Implications For Market Participants
This move is expected to:
- Improve compliance culture among brokers and intermediaries
- Deter future associations with unregulated platforms
- Enhance investor confidence in algorithmic trading tools
- Set a precedent for settlement-based enforcement in tech-driven violations
Retail investors, too, stand to benefit as SEBI tightens its grip on misleading platforms and ensures that only regulated entities offer trading services.
Conclusion: A Timely Opportunity For Clean Slate
SEBI’s extension of the Settlement Scheme till October 16 is more than a procedural update—it’s a strategic gesture to balance enforcement with reform. Brokers who missed the initial deadline now have a second chance to resolve their cases and align with regulatory expectations. As algo trading continues to evolve, SEBI’s proactive stance will be key to maintaining market integrity and investor trust.
Sources: SEBI Official Notification, Edunovations Current Affairs Digest, Invest Policy Regulatory Update
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