SEBI Chair Flags High-Frequency Trading Volumes, Pledges Predictive Oversight Of Pump And Dumps

Tuhin Kanta Pandey, Chairperson of Securities and Exchange Board of India (SEBI), pledged that the regulator will keep updating its framework to deal with growing volumes of high-frequency trading in India’s equity and derivatives markets.

On cybersecurity, Pandey warned that a cyber incident at a single institution can destabilize the entire ecosystem. SEBI has issued a Cybersecurity and Cyber Resilience Framework, he said, and guidelines on Air Gap. This is a mechanism to keep core activities insulated if external-facing networks are breached.

The Chairperson mentioned that it will be issued in consultation with Market Infrastructure Institutions (MIIs). He added that the MIIs are being stress-tested through live disaster recovery drills.

SEBI has implemented a redundancy model for Clearing Corporations so that if one clearing corporation is down, another can continue its operations; Pandey noted that this model became operational from Dec. 20, 2023. He added that SEBI is examining a safety net for depository participants similar to protections for stock brokers.

On market surveillance, Pandey said SEBI is shifting from reactive supervision to predictive oversight. The regulator has revamped its Data Warehouse to develop new rule-based alerts to identify pump-and-dump patterns and detect fraudulent trades in bulk deals.

Pandey said inclusion remains central to resilience.

Citing a recent SEBI survey, he said about 63% of households are aware of securities products but only 9.5& participate. Meanwhile, urban participation was around 15% compared with 6% in rural areas, and about 36% of investors possess high or moderate knowledge of securities markets.

SEBI has simplified KYC norms to permit transactions as soon as KYC is completed and is prioritising a secure, easy KYC access for NRIs.

Investor protection from cyber frauds and misleading advice by unregistered influencers will continue to be a focus through initiatives such as the SEBI vs SCAM campaign, SEBI CHECK on the SEBI website and the Saarthi app.

SEBI has also incentivised first-time mutual fund investors from B-30 cities and first-time women investors.

Pandey also announced that daily traded volumes in cash equities have nearly doubled to over Rs 1 lakh crore in three years, while cautioning that more work is needed to deepen the cash equities market.

He said short-term derivatives, including index options, are being subject to data-driven regulatory review.