The Securities and Exchange Board of India (Sebi) is considering a graded compliance framework for stockbrokers, with regulatory requirements linked to their business scale, client exposure and dependence on technology, chairman Tuhin Kanta Pandey said on Saturday.
Addressing the 16th International Capital Market Convention organised by the Association of National Exchanges Members of India (ANMI) in Mumbai, Pandey outlined a series of measures aimed at improving market efficiency, reducing regulatory costs and strengthening investor protection.
The proposed framework seeks to make compliance more proportionate to the size and operational risks of individual brokers, rather than applying identical requirements across the industry. Sebi is also reviewing regulations governing depository participants to simplify compliance and strengthen safeguards against fraud.
Sebi examines trading terminal misuse, short-selling rules
The regulator is developing safeguards to prevent the misuse of trading terminals and reviewing the short-selling and securities lending and borrowing (SLB) framework to improve liquidity and price discovery.
Sebi is also working to bring its inspection portals into a unified digital workflow, which is expected to streamline supervision and make regulatory processes more consistent.
Separately, the regulator plans to extend the automated give-up and take-up facility in the cash market segment to custodial clients, including portfolio management services (PMS) and alternative investment funds (AIFs). The facility is intended to improve capital efficiency by reducing the time funds remain blocked while custodians confirm transactions.
Sebi is also examining ways to reduce compliance costs associated with tender offers, share buybacks and offers for sale (OFS), where parallel clearing arrangements can increase operational expenses.
Tokenised bonds, AI safeguards on regulatory agenda
Beyond equity markets, Sebi is developing a market-making framework to encourage greater secondary-market trading in corporate bonds, where improving liquidity remains a key priority.
Under the next phase of its Demat 2.0 initiative, tokenised corporate bonds are expected to trade in the secondary market. The initiative is intended to improve liquidity, reduce settlement risks and accelerate access to funds. A pilot for corporate bond tokenisation was launched by Sebi and the Reserve Bank of India in September 2026.
On technology, Sebi is exploring an Artificial Intelligence (AI) sandbox that would allow developers to test new applications in a controlled environment while enabling the regulator to assess potential risks.
The regulator is also finalising guidelines for responsible AI use, with provisions for clear accountability, data controls, emergency shutdown mechanisms and human oversight. The framework is expected to follow a tiered approach aligned with recommendations from the International Organization of Securities Commissions.
Pandey also urged market intermediaries to treat cybersecurity as a business priority, stressing the need to test systems, prepare for disruptions and strengthen operational resilience as technology assumes a larger role in financial markets.
The proposed measures form part of Sebi’s broader effort to deepen capital markets while balancing innovation, efficiency and investor protection.