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India’s securities regulator is poised to roll out a new regulatory framework aimed at the responsible use of artificial intelligence and machine learning in its capital markets. The guidelines, expected within a week, will sit alongside forthcoming rules on how derivatives settlement prices are set on expiry days.
Key developments include a tiered AI oversight model that mandates clear accountability, data‑control mechanisms, kill‑switch capabilities and ongoing human supervision. The regulator also emphasizes that “technology cannot dilute accountability,” insisting that market participants remain liable for AI outcomes, data quality, model governance and cyber resilience. By aligning the framework with the International Organization of Securities Commissions’ AI supervisory toolkit, SEBI seeks to foster an agile yet secure governance structure.
Why this matters: The move signals a shift toward formalized AI risk management in a market that is rapidly adopting algorithmic trading and analytics. Explicit human‑oversight requirements aim to curb systemic risks, protect investors, and maintain market integrity as AI‑driven strategies become more sophisticated.
What to watch next:
- Final publication of the AI guidelines and the accompanying derivatives settlement‑price rules.
- Market participants' implementation plans for data controls, kill‑switches, and governance processes.
- Feedback from industry groups on the tiered approach and any subsequent refinements to align with global best practices. [[1]]