SEBI to introduce measures against misuse of proprietary trading terminals
What's the story
The Securities and Exchange Board of India (SEBI) is working on a framework to prevent the misuse of trading terminals. Tuhin Kanta Pandey, Chairman of SEBI, announced this at the 16th International Capital Market Convention in Mumbai. The move comes after reports of some brokers allegedly misusing proprietary trading terminals by allowing individual traders to trade through their accounts for fees or profit-sharing arrangements.
Proposed safeguards
Mapping terminals with MAC addresses
Among the measures being considered by SEBI is mapping terminals with their Media Access Control (MAC) addresses and static IP addresses.
This would help identify where trades are executed from and who is using these terminals.
The regulator is also reviewing short-selling and securities lending and borrowing rules to improve liquidity and price discovery.
It is also developing a market-making framework to boost secondary-market trading in corporate bonds.
Regulatory simplification
Simplifying regulations for stockbrokers
Pandey also spoke about SEBI's plans to simplify regulations and widen investor access.
He said the regulator is exploring graded compliance for stockbrokers, depending on their scale, client exposure, and reliance on technology.
The rules for depository participants are also being reworked to simplify compliance and strengthen safeguards against fraud.
Platform extension
Extending common reporting platform to depositories
SEBI also plans to extend the common reporting platform to depositories, allowing a single submission for both stock exchanges and depositories.
The regulator is also extending the automated give-up and take-up facility to custodial clients such as portfolio management services (PMS) and alternative investment funds (AIFs) in the cash segment.
This is aimed at preventing clients' funds from being blocked while waiting for confirmation from custodians.
Tech integration
AI sandbox in the works
SEBI is also working on an artificial intelligence (AI) sandbox where new tools can be tested safely.
This would give innovators greater regulatory clarity while allowing the regulator to establish appropriate safeguards.
The regulator also plans to bring its inspection portals into a single digital workflow to make supervision faster and more consistent.
Investor participation
Digital onboarding for global investors
SEBI also plans to make it easier for global investors, including non-resident Indians (NRIs), to invest in Indian markets through digital onboarding, simpler KYC requirements, and reduced paperwork. However, safeguards will be retained.
Pandey stressed that technology has increased the speed and reach of financial markets but has also created new risks such as cyberattacks.
He urged brokers to treat cybersecurity as a business priority rather than just an IT expense.