SEBI last week published a circular (SEBI/HO/MIRSD/DOP/P/CIR/2022/117) asking Stock Brokers not to associate directly or indirectly with Algo trading platforms providing services and strategies marketed with “claims” of high returns on investment and associated “ratings” to the strategies, which could lead to investors being lured by such claims.
Key Highlights from the circular:
Stock brokers who are directly / indirectly referring to any past or expected future return / performance of an algorithm 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.
The circular is intended to protect the investors from falling prey to any kind of mis-selling being done by unregulated entities as well as to restrict the stock brokers from associating with any unregulated entities.
What Dhan and our users need to know:
Dhan as a stock broking platform focuses a lot on product, technology and customer experience across all its channels - Dhan app, Options Trader app, Dhan web (web.dhan.co), TradingView console (tv.dhan.co) and our API platform DhanHQ (www.dhanhq.co).
Dhan is an API first company - the reason we ship our features faster more than anyone else in the market is because we have an API for everything. We use same APIs and infrastructure ourselves for Dhan that we share on DhanHQ, which is one of the reasons are APIs are faster to integrate and some integrations are done in less than a week’s time.
At all times, Dhan focuses on being a pure execution platform for orders that our users send to exchanges via our platforms. Many platforms now use our APIs to build solutions on top of them and build services using the same.
We have always encouraged our users to do their own research on any investing or trading decisions. We fully agree with view of the regulators that any form of misselling via algo platforms wrt to making claims of returns, past performance and rankings or ratings should be restricted. Also there is a general notion that Algo-traders or trades done via Algo-platforms are always profitable or more profitable than others, or give higher returns than trades done otherwise - this is incorrect.
Over the last few days, we have communicated to all platforms that are using Dhan APIs seeking confirmations from them regarding their adherence to the said SEBI circular. Our compliance teams will also be reviewing these platforms and any platform not in adherence to the same will be disabled / deactivated by us.
Further to this, we will also encourage users of Dhan and others as well to ensure you do your own research and analysis before trusting any investment platform (algo or non-algo) based or investment advisor or research based advice.