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NISM Certifications · NISM-Series-VII: Securities Operations and Risk Management · Other Services Provided by Brokers

A broker offers algorithmic trading access to retail clients via an API. Which condition is consistent with the SEBI and exchange framework?

Each algorithm must be registered or approved with the exchange and carry a unique identifier, and the broker remains responsible for risk controls and oversight. Running untracked, untagged or untested algos in the live market would breach the SEBI and exchange requirements.

  1. AEach algo must be approved or registered with the exchange and tagged with a unique identifier before use, with the broker responsible for oversightCorrect
  2. BRetail clients may run any self-developed algo without the broker or exchange knowing
  3. CThe broker may run untested algos in the live market to check their working
  4. DAlgo orders need not carry any identification because they are indistinguishable from manual orders

Explanation

The framework requires algos to be registered or approved with the exchange and tagged with identifiers so orders can be traced, and the broker remains accountable for risk controls. Untracked or untested algos in the live market breach the requirements.

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