With a ₹500 crore investment in technology innovation, SEBI is working to enhance its capabilities in advanced analytics, surveillance systems, cloud infrastructure and security. 

“Technology is a game-changer in financial services as it can not only provide faster and better services to the consumer, it can also be a catalyst in improving the ease of doing business,” said Ajay Tyagi, Chairman, SEBI, at a recent event in Singapore. The SEBI chairman was talking at the South Asian Diaspora Convention at the National University of Singapore. 

Tyagi stated that the organisation’s methodology has consistently been to empower and improve technology capacity-building and simultaneously to know about the potential dangers related to such capabilities. “Due to advancement in technology, funds and securities can now flow across the world in a few microseconds. This enables setting up of complex global structures which could be potentially misused for tax avoidance, money laundering, round-tripping, etc.,“ Tyagi said. 

The trading watchdog is additionally setting up a Network Operations Center (NOC) for consistent checking of the smooth working of the SEBI IT system and Securities Operations Center (SOC). The system will also recognise and moderate cyberattacks on SEBI’s IT foundation productively and compellingly. 

Tyagi also mentioned initiatives such as setting up online complaint redress system of SEBI (SCORES), KYC registration agencies, dematerialisation of securities, T+2 rolling settlement, and the introduction of interoperability of clearing companies. “SEBI not only encourages technological innovation in securities markets, but it also uses and regularly updates technology in its own functioning and plans to spend ₹5 billion on IT projects in the next 5 years” 

How SEBI Is Stepping Up The AI Game

SEBI is now in progress to additionally fortify its in-house analytics ability to help its market surveillance and risk management capacities. From its previous announcement, SEBI had implemented Natural Language Processing (NLP), sentiment analysis or text mining tools that collect insights from unstructured data. They have reportedly considered using voice-to-text and text-to-intelligence systems in any natural language. 

Apart from that, SEBI also deploys a system that makes use of statistical heuristics system which uses clustering or categorisation algorithms to categorise data even though there may be no predefined categories. SEBI has additionally arranged a data lake project to expand advanced analytics tools related to AI/ML, deep learning, big data, which will process huge volumes of structured and unstructured data and content mining for social media surveillance. 

Speaking further, Tyagi stated that emerging technologies like artificial intelligence, machine learning and deep learning are being used in the Indian capital markets in things like robo-advisory services, surveillance through social media analytics and IT security. Apart from that, SEBI is also considering blockchain and RPA in processes like clearing and settlement, risk management, surveillance, compliance automation etc.

Why SEBI Is Building A Social Media Surveillance System

SEBI chairman also announced that the organisation working on a social media surveillance system, which will look for market manipulation information on various platforms. SEBI had found that price-sensitive details had been leaked on social media platforms like WhatsApp before a significant corporate announcement or earning call. 

According to SEBI, market manipulation is rampant in India, and social media analytics fed into IMSS (integrated market surveillance system) will help recognise insider trading patterns. IMSS gathers information on suspicious market activities through many sources, including its network systems at stock exchanges and depositories. There are already robust surveillance systems in place at SEBI, and with new social media, surveillance will add to the previous systems. 

SEBI along with stock exchanges have ventured up their live surveillance of intra-day trade in stocks where there may be suspicion of illegal activity or market maker manipulation such as spoofing that may cause increased volatility or price dumps.