SEBI Plans Domestic AI Model for Securities Trading as Digital Public Infrastructure

SEBI Advances AI Integration for Securities Market

India's markets regulator SEBI is taking decisive steps to integrate artificial intelligence into its securities trading ecosystem. Chairman Tuhin Kanta Pandey announced at a Mumbai summit that the regulatory body is working to implement the International Organization of Securities Commissions' supervisory toolkit while simultaneously exploring the development of a domestic AI model for securities trading1

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. This dual approach positions India to leverage global best practices while maintaining sovereign control over critical financial infrastructure.

The Securities and Exchange Board of India aims to strengthen risk management capabilities and develop an agile AI governance framework through IOSCO's established protocols. Pandey emphasized that this initiative represents more than technological adoption—it signals a strategic move toward building securities market-specific AI infrastructure that could function as digital public infrastructure, governed entirely within India's borders2

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Building Supervisory and Risk Management Frameworks

The regulatory push comes with clear recognition of AI's potential to transform financial services. Tuhin Kanta Pandey outlined how AI-enabled tools could substantially improve services, risk assessment, and supervisory capabilities across the securities market. However, he stressed that effective implementation demands three critical elements: reliable data foundations, effective oversight of AI models, and clear model accountability for decisions made by automated systems1

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This measured approach reflects SEBI's awareness of AI's complexities in financial markets. By establishing robust regulatory oversight mechanisms before widespread deployment, the regulator aims to prevent potential risks while enabling innovation. The focus on domestic governance of the AI model suggests concerns about data sovereignty and the need for regulatory control over algorithms that could significantly impact India's financial stability.

Broader Regulatory Reforms for Foreign Investment

Beyond AI initiatives, Pandey revealed that SEBI is reviewing compliance requirements for foreign investors and plans to issue a consultation paper seeking views on aligning these requirements with global standards. While India has streamlined market access, eased digital onboarding, and simplified procedures for overseas investors, some domestic compliance requirements remain more onerous than those in other major jurisdictions2

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"India will need both domestic and foreign capital to support its growth ambitions ... international participation can widen the pool of capital and bring expertise," Pandey stated at the summit1

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. This acknowledgment comes as SEBI previously planned to relax disclosure requirements for certain offshore funds deemed high-risk, following complaints and legal challenges triggered by rules introduced during scrutiny of offshore investors linked to the Adani Group.

Implications for India's Financial Technology Landscape

SEBI's dual focus on AI adoption and foreign investor accommodation reveals a strategic balancing act. The development of domestic AI infrastructure for securities trading could position India as a leader in financial technology sovereignty while the proposed compliance reforms signal openness to global capital flows. Market participants should watch for the consultation paper on foreign investor requirements and subsequent policy developments around the domestic AI model's architecture and governance structure. The success of this initiative could influence how other emerging markets approach AI integration in financial regulation and whether domestically governed AI models become viable alternatives to relying on foreign technology providers for critical financial infrastructure.