SEBI to Enhance Focus on Technology and Market Risk Management
SEBI plans to intensify its focus on technology and market risks amidst evolving financial landscapes.
Photo by Hulki Okan Tabak
The Securities and Exchange Board of India (SEBI) is set to sharpen its focus on technology and market risks, recognizing the increasing complexities and vulnerabilities in the financial markets. SEBI Chairperson Madhabi Puri Buch highlighted the need for robust risk management frameworks, especially concerning new technologies and potential market manipulations.
This proactive approach aims to safeguard investor interests, maintain market integrity, and ensure financial stability. The move underscores the regulator's commitment to adapting to the rapidly changing financial ecosystem and addressing emerging threats.
UPSC Exam Angles
Role and functions of SEBI as a financial market regulator
Types of risks in financial markets (market, operational, systemic, technology)
Impact of technology (Fintech, AI, HFT) on financial markets and regulation
Investor protection mechanisms and market integrity
Inter-regulatory coordination in the Indian financial sector (SEBI, RBI, IRDAI)
Visual Insights
SEBI's Evolving Focus: Technology & Risk Management (2015-2026)
This timeline illustrates SEBI's proactive approach in integrating technology and strengthening risk management frameworks over the past decade, culminating in its enhanced focus in 2026.
The rapid digitalization of financial markets and increasing sophistication of market participants have necessitated a continuous evolution of SEBI's regulatory framework, particularly in leveraging technology for effective surveillance and robust risk management to protect investor interests and maintain market integrity.
- 2015SEBI (Prohibition of Insider Trading) Regulations, 2015, strengthened with tech for surveillance.
- 2018Introduction of SEBI (Investment Advisers) Regulations, focusing on digital platforms and client data protection.
- 2020Increased emphasis on cybersecurity guidelines for market intermediaries amidst rising digital transactions.
- 2022Implementation of T+1 settlement cycle for equities, leveraging technology for faster settlement and reduced risk.
- 2023Mandatory ESG disclosures for top listed companies, requiring robust data management and reporting systems.
- 2024SEBI begins exploring AI/ML applications for market surveillance and anomaly detection.
- 2025New guidelines for managing risks from high-frequency trading and algorithmic trading platforms.
- 2026SEBI Chairperson highlights enhanced focus on technology and market risk management (Current News).
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Background
Latest Developments
Practice Questions (MCQs)
1. Consider the following statements regarding the Securities and Exchange Board of India (SEBI): 1. SEBI is a statutory body established under the SEBI Act, 1992, with the primary objective of protecting the interests of investors in securities and promoting the development of the securities market. 2. Its regulatory purview extends to all financial market intermediaries, including commercial banks and insurance companies, to ensure comprehensive oversight. 3. In recent times, SEBI has emphasized the need for robust risk management frameworks, particularly concerning new technologies like Artificial Intelligence and High-Frequency Trading. Which of the statements given above is/are correct?
- A.1 and 2 only
- B.1 and 3 only
- C.2 and 3 only
- D.1, 2 and 3
Show Answer
Answer: B
Statement 1 is correct. SEBI was given statutory powers by the SEBI Act, 1992, and its objectives are accurately stated. Statement 2 is incorrect. While SEBI regulates certain activities of banks (e.g., merchant banking, mutual funds sponsored by banks) and insurance companies (e.g., if they issue securities), its primary regulatory purview does not extend to the core banking operations (regulated by RBI) or insurance business (regulated by IRDAI). It focuses on the securities market. Statement 3 is correct. The news article explicitly states SEBI's enhanced focus on technology and market risk management, including new technologies and potential market manipulations.
2. In the context of financial market risk management, which of the following statements best describes 'Systemic Risk'?
- A.The risk of loss due to failure of internal processes, people, and systems or from external events.
- B.The risk that an entire financial system or market could collapse due to the failure of one or more major entities or interconnected events.
- C.The risk of loss arising from adverse movements in market prices, such as interest rates, exchange rates, or equity prices.
- D.The risk that a counterparty will fail to meet its obligations as they fall due.
Show Answer
Answer: B
Option A describes Operational Risk. Option B accurately defines Systemic Risk, which is the risk of collapse of an entire financial system or market, as opposed to the failure of individual entities. Option C describes Market Risk. Option D describes Credit Risk. SEBI's focus on market risk management implicitly includes systemic risk, as the failure of robust frameworks can lead to broader market instability.
3. Which of the following is NOT a primary regulatory function of the Securities and Exchange Board of India (SEBI)?
- A.Regulating the business in stock exchanges and any other securities markets.
- B.Registering and regulating the working of collective investment schemes, including mutual funds.
- C.Regulating the foreign exchange market and managing India's foreign exchange reserves.
- D.Prohibiting fraudulent and unfair trade practices relating to securities markets.
Show Answer
Answer: C
Options A, B, and D are core functions of SEBI as per the SEBI Act, 1992. SEBI is responsible for regulating stock exchanges, various market intermediaries, collective investment schemes (like mutual funds), and preventing malpractices in the securities market. Option C, 'Regulating the foreign exchange market and managing India's foreign exchange reserves,' is primarily the function of the Reserve Bank of India (RBI).