The Securities and Exchange Board of India is preparing a comprehensive overhaul of capital market regulations to improve transparency, liquidity, and investor safeguards across trading systems. Addressing the 16th International Capital Market Convention organised by the Association of National Exchanges Members of India in Mumbai on Saturday, SEBI Chairman Tuhin Kanta Pandey announced that the market watchdog is reviewing rules governing short-selling and securities lending and borrowing, while introducing measures to counter technical vulnerabilities. The regulatory roadmap also encompasses structured oversight for artificial intelligence, tighter cybersecurity mandates, risk-calibrated compliance for stockbrokers, and operational reforms to deepen the corporate bond market.
Testing Sandboxes and Safeguards for Artificial Intelligence
Recognising the rapid expansion of algorithmic trading and automated analytical tools, SEBI is setting up an artificial intelligence sandbox to evaluate emerging technologies in a controlled environment before their rollout in live market operations. The regulator is also drafting responsible-use guidelines focusing on accountability, data management, and continuous human oversight. To mitigate systemic risks stemming from erratic automated decisions or technology disruptions, the proposed framework will require built-in kill switches capable of halting erratic algorithmic systems immediately. Alongside algorithmic oversight, the market regulator is treating cybersecurity as an essential business priority rather than a routine information technology cost, directing market intermediaries to conduct periodic system testing and establish stronger protections against unauthorised terminal access.
Calibrated Supervision and Simplified Broker Compliance
Under the proposed framework, SEBI plans to transition toward a differentiated regulatory model for stockbrokers based on their operating scale, technological dependency, and client risk exposures. The regulator aims to consolidate existing inspection portals into a unified digital platform to streamline administrative assessments and reduce redundant regulatory burdens. Operational procedures for institutional market participants are also set for an overhaul, with plans to introduce automated give-up and take-up mechanisms for custodial clients, including Portfolio Management Services and Alternative Investment Funds in the cash market. This automation is intended to eliminate procedural delays and unlock trading capital and margin that currently remain tied up awaiting custodial confirmations.
New Mechanisms to Deepen Corporate Debt Trading
To foster active secondary trading in corporate debt, the regulator is formulating a dedicated market-making framework designed to expand trading opportunities and liquidity for corporate bonds. Administrative procedures for depository participants will also be streamlined through their integration into a common representation platform, reducing repetitive documentation submissions across exchanges and depositories. Furthermore, parallel clearing mechanisms are being established for tender offers, share buybacks, and offers for sale to accelerate settlement timelines. The eventual implementation of these proposals will be determined by subsequent regulatory notifications as the board works to modernize traditional market conventions alongside modern digital infrastructure.
Follow for daily updates on cybercrime, corporate fraud, DFIR, hacking, investigations, and digital forensics
