Sebi Proposes Restrictions on Terminal Misuse and Introduces Tiered Compliance Standards for Stock Market Intermediaries
NEW DELHI: The Securities and Exchange Board of India (Sebi) is set to implement measures aimed at preventing the misuse of brokers’ trading terminals. Chairman Tuhin Kanta Pandey announced these plans during the 16th ANMI International Capital Market Convention in Mumbai. The proposed measures include varying compliance requirements for brokers based on their size, client base, and technological reliance.
Sebi is also focusing on enhancing cybersecurity and safely testing artificial intelligence (AI) tools. Pandey emphasized the need for market participants to prioritize cybersecurity as a business necessity rather than merely an IT expense. He urged firms to prepare their systems for potential failures and to develop a framework that safeguards against the misuse of trading terminals.
AI safeguards and digital market infrastructure
Sebi is exploring the establishment of an AI sandbox to allow for the safe testing of new tools while providing regulatory clarity for innovators. The regulator is finalizing guidelines for the responsible use of AI, which will include provisions for accountability, data controls, kill switches, and human oversight, in alignment with the International Organization of Securities Commissions’ (IOSCO) toolkit.
Additionally, Sebi is developing a market-making framework to boost secondary trading in corporate bonds. The next phase of Demat 2.0 will introduce tokenized corporate bonds for trading in the secondary market, which is expected to enhance liquidity, reduce settlement risk, and facilitate faster access to funds.
Pandey urges brokers to focus on investor risks
Pandey highlighted that the next growth wave in broking will likely emerge from smaller towns and villages rather than major cities. He referenced Sebi surveys showing a growing interest among Indians in market investments. He called on the industry to assist investors in making informed decisions and to encourage longer investment horizons.
He urged brokers to extend their focus beyond merely completing know-your-customer (KYC) processes. Instead, they should consider whether the risks their clients are taking align with their financial capabilities. Pandey stated, “You are often the first to see when the risk they take outgrows their resources,” advocating for a more ongoing dialogue with clients about their needs.
Pandey concluded by outlining Sebi’s roadmap, which emphasizes simpler rules, deeper markets, responsible technology, and wider access.
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