SEBI Overhauls Trading System to Cut Costs and Speed

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AuthorRiya Kapoor|Published at:
SEBI Overhauls Trading System to Cut Costs and Speed
Overview

India's SEBI is replacing its centralized STP hub with a decentralized API system. This aims to slash costs, reduce latency, and mitigate concentration risk by enabling direct connections between STP Service Providers. The move is expected to enhance scalability and market diversification without affecting end-users like brokers.

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Shifting to API for Trading

The Securities and Exchange Board of India (SEBI) is making a major change to its Straight-Through Processing (STP) system. Instead of a single, central hub, SEBI will use a decentralized network based on Application Programming Interfaces (APIs). This new approach is expected to significantly lower operational costs and speed up message delivery, making trading more efficient and scalable for institutional clients.

Under the new plan, STP Service Providers (SSPs) will connect directly to each other using APIs. This bypasses the current central hub, creating a more secure and standardized way to exchange data.

Reducing Single Point of Failure

Currently, the trading system faces a major risk because most messages go through just one SSP. Between April and December 2025, 95-99% of all STP messages used a single provider. SEBI notes that this setup, along with the high costs and delays of the current hub, increases risk and has hindered broad interoperability. The regulator believes a more spread-out model is necessary for resilience.

Improving Market and User Experience

These changes should not negatively affect end-users such as stockbrokers and fund houses. SEBI expects the new system to encourage more SSPs to join, leading to a more varied market. This could also spur the development of new services. SEBI is also considering an optional API connection for users within the same SSP network to further improve efficiency and reduce manual errors.

The public can provide feedback on these proposals until June 9.

Global Trends in Market Infrastructure

Globally, financial markets are moving toward API-based systems to build more resilient and efficient trading infrastructure. While SEBI's specific system has no direct competitors, the trend shows a move away from older, central models to more flexible and interconnected architectures. This could make India's market infrastructure more competitive in terms of cost and speed.

The success of this overhaul will depend on how well SSPs adopt the new system and how effectively standardized protocols are implemented. This regulatory announcement focuses on market infrastructure and does not involve specific stock price movements or analyst ratings.

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Disclaimer:This content is for educational and informational purposes only and does not constitute investment, financial, or trading advice, nor a recommendation to buy or sell any securities. Readers should consult a SEBI-registered advisor before making investment decisions, as markets involve risk and past performance does not guarantee future results. The publisher and authors accept no liability for any losses. Some content may be AI-generated and may contain errors; accuracy and completeness are not guaranteed. Views expressed do not reflect the publication’s editorial stance.