SEBI to stricken rules for AI-based trading

The Securities and Exchange Board of India (SEBI) is working on a framework to regulate artificial intelligence (AI)-driven trading. SEBI Chairman Tuhin Kanta Pandey emphasized during the announcement that while AI offers automation opportunities, it also increases cyber risks to the financial ecosystem.

“For AI-driven trading, we are actually going for guidelines on that. On how AIs will, in future, do that. Now AI has an opportunity as well as a risk. The opportunity is that you can use the AI for several of your things which can be automated, but risks will come with the cyber risk. Cyber risk from AI has increased and we are now issuing an advisory on how the SEBI ecosystem, the regulated entities can be protected from that enhanced risk,” Pandey told ANI.

SEBI is expected to push for stronger cybersecurity practices across its ecosystem. This includes better patch management, tighter verification systems, and stricter oversight of third-party software vendors.

The SEBI Chairman also spoke about an AI-enabled investor awareness initiative called "Project Jagrook," which aims to enhance investor engagement through a multi-agency and multimedia campaign.

Addressing concerns around foreign portfolio investor (FPI) withdrawals, Pandey described them as a normal part of global capital movement rather than a sign of distress.

“The FPI's come and go depending upon what they think about the relative situation between one country vis-a-vis another global jurisdiction. There are a number of factors which are contingent. 'What are the returns that the FPI's are getting in a particular market post?' It's a dollar return, not a rupee return, in a market, depending upon various factors like interest rates, arbitrage, the stance of the central banks,” Pandey said.