SEBI Issues Directive To Disclose All AI-Based Tools Used In Stock Market

Putting greater emphasis on the reported black box method of trading in India, Securities And Exchange Board of India (SEBI) announced that applications based on artificial intelligence and machine learning would have to make quarterly disclosures on their compliance with the cybersecurity framework. In a circular sent out by SEBI, the stock market regulator said, "It is imperative to ensure that any advertised financial benefit owing to these technologies for products offered by intermediaries should not constitute to misrepresentation." "With effect from the quarter ending March 2019, registered stock brokers or depository participant using AI and ML-based application or system are required to fill in form and make submissions on a quarterly basis within 15 calendar days of the expiry of the quarter," added the circular. SEBI is also conducting a survey and creating an inventory of the AI/ML landscape in the Indian financial markets to gain an in-depth understanding of the adoption of such technologies in the markets and to ensure preparedness for any AI/ML policies that may arise in the future. The market watchdog also added that there is a sharp increase in the usage of AI and ML as product offerings by market intermediaries and participants called “robo advisors”, in investor and consumer-facing products.