01 Read
What happened
SEBI Chairman Tuhin Kanta Pandey announced that the regulator will soon release guidelines on artificial intelligence and machine learning use in capital markets, speaking at the second Capital Market Confluence 2026 organised by the BSE Brokers' Forum. The framework will govern how market participants deploy AI tools. Separately, Pandey indicated that rules on expiry-day settlement would be issued within a week, signalling a period of active regulatory reform across market structure and technology.
02 Understand
Why it matters
SEBI's upcoming AI and machine learning framework is significant because capital markets increasingly rely on algorithmic trading, robo-advisory, fraud detection, and risk modelling powered by AI. Without a regulatory guardrail, these tools can amplify systemic risk — flash crashes triggered by algorithmic herding, biased credit or investment recommendations, and data-privacy vulnerabilities are real concerns regulators globally are grappling with.
The framework is expected to follow a principles-based approach, meaning it will set broad conduct standards rather than prescribe specific technical architecture. This is consistent with how SEBI has historically regulated algorithmic trading — it issued the algorithmic trading circular in 2012 and co-location norms in 2016 after the NSE co-location controversy.
For exam purposes, connect this to SEBI's core mandate under the SEBI Act, 1992: protecting investor interests, developing the securities market, and regulating it. AI regulation sits squarely within 'regulation' and 'investor protection.' The announcement also aligns with India's broader National Strategy for Artificial Intelligence (NITI Aayog, 2018) and the Digital Personal Data Protection Act, 2023, which governs how data — including financial data — is processed.
The BSE Brokers' Forum event where this was announced is also exam-noteworthy: it reflects SEBI's consultative approach, engaging market intermediaries before finalising norms. SEBI is a statutory body established under the SEBI Act, 1992, headquartered in Mumbai.
The framework is expected to follow a principles-based approach, meaning it will set broad conduct standards rather than prescribe specific technical architecture. This is consistent with how SEBI has historically regulated algorithmic trading — it issued the algorithmic trading circular in 2012 and co-location norms in 2016 after the NSE co-location controversy.
For exam purposes, connect this to SEBI's core mandate under the SEBI Act, 1992: protecting investor interests, developing the securities market, and regulating it. AI regulation sits squarely within 'regulation' and 'investor protection.' The announcement also aligns with India's broader National Strategy for Artificial Intelligence (NITI Aayog, 2018) and the Digital Personal Data Protection Act, 2023, which governs how data — including financial data — is processed.
The BSE Brokers' Forum event where this was announced is also exam-noteworthy: it reflects SEBI's consultative approach, engaging market intermediaries before finalising norms. SEBI is a statutory body established under the SEBI Act, 1992, headquartered in Mumbai.
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