There is a lot of debate surrounding the legality of trading bots. Some people believe that they are illegal, while others claim that they are perfectly legal. So, are trading bots legal? 

In this article, we will explore the legality of trading bots and provide you with all the information you need to make an informed decision. 

Are trading bots legal? 

Yes, trading bots are legal and have been used for many years now by traders. In fact, they are quite popular among experienced traders who use them to automate their trading strategies. However, some people believe that trading bots are illegal. 

The technology itself is not illegal but human malpractice such as insider trading, market manipulation, and fraud can make it illegal. 

This question also depends on the jurisdiction. The first thing to consider is whether or not trading bots are classified as financial instruments. If they are, then they would be subject to financial regulations. 

However, there is no definitive answer to this question. The reason for this is that there is no central authority that regulates trading bots. As such, it is up to each individual country to decide whether or not they are legal. 

Some countries, like the United States, have clear laws and regulations surrounding trading bots. In the US, trading bots are considered to be a type of investment adviser. This means that they are subject to the same laws and regulations as other investment advisers. These laws include things like registration requirements and disclosures about how the bot operates. 

The SEC has also issued guidance on trading bots. In this guidance, the SEC states that any bot that trades securities on behalf of its users must register as a broker-dealer. This is because bots are considered to be acting as an intermediary between buyers and sellers. 

Algorithmic Trading 

Another thing to consider is whether or not trading bots are considered to be “algorithmic traders”. If they are, then they would be subject to the rules and regulations of the exchanges on which they trade. For example, the New York Stock Exchange has very strict rules about algorithmic trading. This is meant to protect the integrity of the markets. 

This type of trading is widely used by professional traders and institutions. It is also used by high-frequency traders, who make a lot of trades in a very short period of time. The government is well aware of this practice and has taken steps to make sure that the markets are not manipulated. However, algorithmic trading itself is not illegal. 

Why Trading Bots Should Be Legal

Algorithmic trading should be legal because it’s not manipulation. Some people believe that trading bots are illegal because they can be used to manipulate the markets. However, this is not the case. Algorithmic trading works by following a set of predetermined rules. These rules are not designed to manipulate the markets, but rather to take advantage of market conditions. 

In addition, algorithmic trading should be legal because it levels the playing field. Professional traders and institutions have been using algorithms to trade for years. This gives them a significant advantage over retail investors. Allowing everyone to use trading bots would level the playing field and give everyone a fair chance to make money in the markets. 

Why Trading Bots Should Be Illegal 

Trading bots should be illegal because if the human trader does not manage risks well, then the bot will lose money. Trading bots are not perfect. They are designed to follow a set of rules, but they are not perfect. This can cause a lot of emotional stress for the human trader. 

In addition, trading bots should be illegal because they can be used to manipulate the markets if the institution programs it with the ability to trade large amounts of capital. For example, if a bank were to create a trading bot that could trade $100 million per day, it could easily manipulate the markets. If the trade goes wrong, institutions can also blame these bots rather than take responsibility. 

The verdict

The answer to this question is not clear-cut. It depends on your perspective. However, algorithmic trading is legal, although there are regulations and malpractice can lead it to become illegal.


Another type of trading bot is a “Robo-advisor”. These bots are similar to investment advisers, but they do not advise about specific investments. Instead, they provide general advice about investing. Robo-advisors are subject to the same laws and regulations as other investment advisers. 

Why Robo-advisors Should Be Legal

There are a few reasons why Robo-advisors should be legal. First, they can provide valuable information to investors. This information can help investors make more informed decisions about their investments. 

Second, trading bots can help to level the playing field between small investors and large institutions. This is because they can provide small investors with the same type of information that large institutions have. 

Finally, trading bots can help to reduce panic selling. This is because they can provide investors with information about the market conditions in real-time. It is also a more hand-off approach which means many clients can simply automate their investments without having to constantly monitor them. 

Why Robo-advisors Should Be Illegal

Robo-advisors can take over the jobs of human investment advisers. This can lead to mass unemployment within the industry. This can hurt the economy as many financial jobs are lost which would lead to additional societal problems. 

In addition, these bots can be programmed to take advantage of small investors. They can do this by giving them bad investment advice or by providing them with information that is not in their best interests. For example, it can advise an investor to make frequent trades just so that the institution can earn more in commission fees. 

The verdict 

Robo-advisors are less intense than algorithmic bots in the sense of market manipulation. However, some precautions still need to be addressed. This is because human psychology is still influenced by this technology. 

It can be helpful for those that want a hands-off approach, but can also do more harm than good. As of right now, Robo-advisors are legal in many countries and do not face many risks of potentially becoming illegal.


Trading bots are legal as long as they adhere to the regulations set by the exchanges. However, there are some concerns about their potential to manipulate the markets. Robo-advisors are also legal, but there are concerns about their ability to provide bad investment advice. 

Overall, it is important to be aware of the risks associated with these types of bots before using them.