SEBI Plans Trading Terminal Safeguards, Graded Broker Compliance And AI Rules To Strengthen India's Securities Markets

The Securities and Exchange Board of India (SEBI) is preparing safeguards to prevent the misuse of trading terminals operated by stockbrokers. Chairman Tuhin Kanta Pandey announced the proposed measures on 24 October 2026. The regulator is also considering a graded compliance framework that would account for brokers’ business size, client exposure and dependence on technology.

The move follows concerns that some brokers may have allowed individual traders to use their proprietary trading accounts through arrangements involving fees or profit-sharing. Such practices could potentially bypass prescribed requirements relating to margins and disclosures.

One measure under consideration is to link trading terminals to their Media Access Control (MAC) addresses and static Internet Protocol (IP) addresses. This will help in identifying the location from which trades are placed and establish who is operating the terminals.

SEBI Plans Tailored Compliance Requirements For Stock Brokers

SEBI wants brokers to follow compliance rules that reflect the size and risk of their businesses. This approach could strengthen supervision without placing the same compliance burden on every broker. The regulator is also working to consolidate its inspection portals into a single digital workflow. This could streamline supervisory processes and make regulatory interactions more efficient.

In another operational change, SEBI plans to extend the automated give-up and take-up facility in the cash market to custodial clients. This will also include portfolio management services (PMS) and alternative investment funds (AIFs). The facility is intended to improve capital efficiency by reducing the need for brokers to block funds while awaiting confirmation from custodians.

SEBI is also reviewing short-selling rules and securities lending and borrowing (SLB) arrangements. The objective is to improve market liquidity and price discovery.

AI Safeguards And Corporate Bond Market Reforms

SEBI is finalising guidelines for the responsible use of artificial intelligence (AI) in the securities market. The proposed framework is expected to include clear accountability, data controls, emergency shutdown mechanisms and human oversight. It will follow a tiered approach aligned with guidance from the International Organisation of Securities Commissions (IOSCO).

The regulator is also exploring an AI sandbox. This would allow new tools to be tested in a controlled environment while giving developers greater clarity about regulatory expectations.

Separately, SEBI is developing a market-making framework to encourage secondary-market trading in corporate bonds. It is also planning to enable tokenised corporate bonds to trade in the secondary market as part of the next phase of Demat 2.0.

These initiatives form part of a broader effort to strengthen market infrastructure, encourage responsible technological innovation and improve access to India's securities markets.

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