SEBI Eases Order-to-Trade Ratio Framework for Algorithmic Trading
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- Last Updated on 6 February, 2026
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Circular no. HO/47/11/16(2)2025-MRD-POD2/I/4113/2026; Dated: 04.02.2026
The Securities and Exchange Board of India (SEBI) has eased the order-to-trade ratio (OTR) framework applicable to algorithmic trading by expanding the exemption limits for equity option contracts. The move is aimed at facilitating efficient price discovery while reducing compliance burden for market participants.
1. Revised Exemption for Algorithmic Orders in Equity Options
Under the revised norms, algorithmic orders in equity options will be exempt from penalties imposed for higher OTR, provided such orders are placed within:
- ±40% of the Last Traded Price (LTP) premium, or
- ₹20,
whichever is higher.
Orders falling within this revised threshold will not be considered for penal action under the OTR framework.
2. Exclusion of Market-Making Orders from OTR Computation
SEBI has further clarified that:
- Algorithmic orders placed by Designated Market Makers (DMMs) for the purpose of market-making
- Shall not be counted toward the computation of the order-to-trade ratio
This exclusion recognises the role of market makers in providing liquidity and maintaining orderly markets.
3. Applicability of the OTR Framework
The OTR framework continues to apply to:
- Orders placed in the cash segment, and
- Orders placed in the derivatives segment
The relaxations are specific to the computation and exemption parameters under the framework and do not dilute overall regulatory oversight.
4. Effective Date
-
Effective from – 6 April 2026
Market participants are required to align their algorithmic trading systems and compliance processes with the revised norms from the effective date.
Click Here To Read The Full Circular
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