Market regulator the Securities and Exchange Board of India (Sebi) is set to introduce a new framework designed to prevent the misuse of brokers' trading terminals. This initiative, aimed at bolstering market integrity, was announced by Sebi chairman Tuhin Kanta Pandey during the 16th ANMI International Capital Market Convention held in Mumbai on Saturday.
As part of these regulatory updates, Sebi is considering a graded approach to compliance. Under this proposed system, requirements for market intermediaries will no longer be uniform; instead, they will be tailored based on the size of the brokerage firm, its client base, and its level of technological reliance. Furthermore, the regulator intends to consolidate its various inspection portals into a single digital platform to enhance the efficiency and consistency of its supervisory processes.
Addressing the gathering at the event organised by the Association of National Exchanges Members of India, the chairman emphasised that cybersecurity should be treated as a fundamental business priority by all market participants rather than a mere IT expense. He urged brokers to conduct thorough system testing and ensure they are adequately prepared to manage potential operational failures.
Technology remains a cornerstone of Sebi’s upcoming agenda, particularly regarding the responsible deployment of artificial intelligence. The regulator is currently exploring the creation of an AI sandbox—a controlled environment where developers can test new tools safely while receiving necessary regulatory guidance. These impending guidelines will follow a tiered structure, incorporating provisions for data controls, human oversight, accountability, and the inclusion of “kill switches,” consistent with the toolkit provided by the International Organization of Securities Commissions (IOSCO).
The regulator is also focused on advancing the corporate debt market. Plans are underway to develop a market-making framework designed to stimulate secondary trading in corporate bonds. Additionally, the next phase of “Demat 2.0” is expected to facilitate the trading of tokenised corporate bonds in the secondary market. According to the regulator, these measures are intended to foster better liquidity, reduce settlement risks, and provide investors with faster access to funds.
Beyond structural market changes, Sebi is reviewing existing regulations concerning securities lending, borrowing, and short selling to improve price discovery and market depth. Simultaneously, the rules governing depository participants are being revised to strengthen fraud defenses and simplify overall compliance burdens.
In a final address regarding retail participation, the Sebi chairman noted that future growth is anticipated to shift toward smaller towns and villages. He encouraged brokers to evolve their understanding of KYC (Know Your Customer) procedures, advocating that firms view it as “Know Your Client's Needs.” He urged intermediaries to ensure that the risks their clients assume remain aligned with their actual financial resources, stating that investors who are well-informed about risk are more likely to remain invested for the long term, ultimately benefiting the entire market ecosystem.
Summarising the regulator’s broader strategy, Pandey reiterated that the current roadmap is built upon four primary pillars: fostering deeper markets, implementing simpler regulations, encouraging the responsible use of technology, and ensuring wider, more inclusive access for investors across the country.
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