Sebi reviews short selling, SLB rules; plans AI sandbox, bond market-making
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The Securities and Exchange Board of India (Sebi) is reviewing short selling and securities lending and borrowing (SLB) to improve liquidity and price discovery, while developing safeguards to prevent misuse of trading terminals, Chairman Tuhin Kanta Pandey said on Saturday.
The regulator is also planning to bring its inspection portals into a single digital workflow to make supervision faster and more consistent.
It is exploring an artificial intelligence (AI) sandbox to allow new tools to be tested safely, while providing innovators with regulatory certainty and ensuring appropriate safeguards.
Addressing the 16th International Capital Market Convention of the Association of NSE Members of India (Anmi) in Mumbai, Pandey said Sebi was finalising guidelines on the responsible use of AI.
These would follow a tiered approach, with clear accountability, data controls, kill switches and human oversight, in line with the International Organization of Securities Commissions’ toolkit.
Separately, Sebi is developing a market-making framework to boost secondary trading in corporate bonds.
The regulator is also exploring graded compliance requirements for stockbrokers based on their scale, client exposure and reliance on technology.
Pandey said Sebi would extend the automated give-up and take-up facility to custodial clients such as portfolio management services (PMS) and alternative investment funds (AIFs) in the cash segment.
The measure is intended to free up funds and margins while brokers await custodian confirmation.
Pandey flagged growing technology-related risks as algorithms account for a larger share of trades.
“Algorithms now drive a growing share of trades. Artificial Intelligence is reshaping how people invest. Cyber-attacks grow sharper every year. A single outage can hurt thousands of investors within minutes. A single breach can shake trust across the system. So, treat cyber security as a business priority, not an IT expense. Test your systems. Plan for failure,” Pandey said.
On easing compliance, Sebi is reworking rules for depository participants to simplify requirements and strengthen safeguards against fraud.
The Samuhik Prativedan Manch will also cover depositories, allowing a single submission to serve both exchanges and depositories.
The regulator is also addressing the need for parallel clearing in tender offers, buybacks and offers for sale to improve capital efficiency and reduce compliance costs.
It is extending the automated give-up and take-up facility to custodial clients, including PMS and AIFs, in the cash segment.
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