Securities and Exchange Board of India (SEBI) Chairman Tuhin Kanta Pandey on Monday stated that the market regulator will soon release guidelines for AI-driven trading, emphasizing that artificial intelligence brings both opportunities and increased cyber risks to the financial ecosystem.
Speaking at an event organized by the Association of Mutual Funds in India in Odisha, Pandey indicated that SEBI is developing a framework to regulate the expanding use of AI in trading activities.
“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.
He noted that AI is assisting financial entities in automating processes and broadening multilingual investor outreach, but cautioned that the growing reliance on technology has also heightened vulnerabilities that could jeopardize market integrity.
“So as you know, everyone has a software and if certain cyber security is threatened, that means if vulnerabilities are found in the software, very, very quickly, there is a problem that we will be attacked and those attacks may be successful. Then that is bringing risk to the market integrity,” Pandey explained to the media.
The SEBI Chairman also discussed “Project Jagrook,” an AI-enabled investor awareness initiative designed to enhance investor engagement through a comprehensive, multi-agency and multimedia campaign. He emphasized the necessity for robust patch management and improved verification systems to secure software, including applications provided by third-party vendors.
Regarding foreign portfolio investor (FPI) outflows, Pandey characterized these movements as part of the normal global investment cycle, noting that overseas investors continually evaluate returns and macroeconomic conditions across different markets.
“The FPIs 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 FPIs 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 stated.
Additionally, Pandey addressed unauthorized deposit schemes, asserting that state governments possess legislative authority to combat illegal collections through laws such as the Chit Fund Act, the Banning of Unauthorized Deposits Act, and state-level regulations like the OPID Act in Odisha.
He encouraged asset management companies and local administrations to guide investors toward regulated financial products such as mutual funds, Portfolio Management Services, and Alternative Investment Funds.
Source: ETCFO.com
