Hello Traders,
Earlier this year, in the month of February, SEBI introduced the much awaited circular on Safer Participation of Retail Investors in Algorithmic Trading, which gave guidelines on how retail traders can interact with markets using Algos. This outlined broader direction for exchanges, brokers, algo providers and retail algo traders - which we covered here.
In accordance with this, NSE has released further guidelines, clarifying details on how Algos for retail traders & investors will be treated moving forward. Some of the key points highlighted there includes:
1. Static IP for API Access
- What it means: Retail traders must use a static IP to access trading APIs, ensuring secure and traceable connectivity. There can be two IP addresses - primary and secondary IP, which needs to be mapped to the API key.
- This translates to you generating a static IP key and sharing with us. Do note that circular highlights this IP can only be changed once a week and as we understand, it can be difficult to ensure IP to be the same, in scenarios where orders are placed from different networks.
2. Multiple API Keys
- You can use different API keys for various algos or trading segments.
- At Dhan, you already have the option of multiple access tokens, which will be replaced by API Key + OAuth login. However, do note that only one API Key can be used per user account for non-registered algos (Algos which place less than 10 orders/sec)
3. Order Rate Limits (Threshold Order Per Second)
- What it means: Retail traders can place up to 10 orders per second without needing to register their algo. Exceeding this limit requires algo registration.
- Our systems will automatically enforce these limits, rejecting excess orders and guiding you to register algos if your trading exceeds 10 OPS. Most individual algos, as we have observed, fall below this threshold. However, there are certain power users who will require to register their algos in this scenario. Also, the threshold might change with change in directives from the exchanges.
4. Algo Registration and Compliance
- What it means: If you trade above the Order Per Second (OPS) threshold, your algos need official registration with exchanges.
- We’ll simplify this by directly handling algo registrations with exchanges. You’ll receive an exchange-issued algo ID, which we’ll tag to your trades. Most algo traders wouldn’t require this, except for high volume traders, who use algos to punch bulk orders.
5. Enhanced Security and Authentication
- Stronger security with OAuth-based and two-factor authentication (2FA) for all API access. In addition to this, logout after every trading session, specifically API tokens.
6. Hosting Algos
- All retail algos must be hosted securely on broker-approved servers.
- This is a point which will require further clarification, as algos here could mean all the registered algos or the non-registered algos (below threshold of 10 orders/second).
In addition to this, the regulations also outline how Algo Providers would come into the picture i.e. how they can get empanelled with the exchanges and work with brokers to offer their services to users. This will require us to ensure each of the platforms that you use are empanelled at the exchange and are providing the best trading tools and experience to you on top of DhanHQ APIs.
We have always believed that the API, Algo and Systematic traders needed simple, stable and robust trading APIs and we are happy to see the usage of DhanHQ APIs stack. Not to miss mentioning that DhanHQ Trading APIs run on the same incredible DEXT trading engine where we continue to enhance core performance of our transaction processing systems. DhanHQ API was launched in Feb 2022, very early in our journey. Since then this has always been upgraded and enhanced. Just recently to version 2. In fact, Dhan was first to distinguish between Trading API & Data API. Here is what @PravinJ has to say on it - link
At Dhan, we’re excited about these regulations. They align perfectly with our ongoing commitment to providing secure, transparent, and efficient algorithmic trading solutions for our retail traders. Our APIs at DhanHQ will now come with enhanced safety measures without sacrificing flexibility or ease of use.
We believe these measures empower retail traders to confidently participate in algo trading, leveraging the latest technology with added layers of security and compliance.
It will be great to have your comments on these regulations and how we, at Dhan, can make it simpler for you to automate your trading via Algorithmic Trading.
-Hardik