Sebi chief has warned of strict action against market manipulators. Here's why

Securities and Exchange Board of India chairman Tuhin Kanta Pandey has warned of strict action against those trying to manipulate the closing auction session, which was rolled out recently.    Since the closing auction session (CAS) was introduced for efficient discovery of closing stock prices, there have been complaints, and noticeable gaps were observed in the initial days between pre-auction price levels and final settlements.   Pandey pointed the CAS participation was increasing, and the regulator was looking at the constraints in participation. However, Pandey warned participants against manipulation.   "We want to make one thing clear: if people do manipulation in CAS, then we will take strict action and do it immediately. And in the CAS system, we have more capability to catch manipulation. Compared to the old VWAP (volume weighted average price) system) system," Pandey said on the sidelines of the FICCI Capital Markets summit.   He stressed that CAS had been aimed towards transparency. But, if someone was trying to manipulate the system to defame it, then they would be deceitful.  SME IPO framework review    Meanwhile, Sebi is reviewing the IPO (initial public offering) framework for small and medium enterprises as it looks to make fundraising easier for genuine companies, while also maintaining investor protection and market integrity, Pandey said.    He pointed out there had been various issues in the SME framework that had curbed the growth of the organisations in the SME segment, while also making trading difficult. 

MUST READ: Regular vs direct mutual funds: 34% of regular SIP assets held 5+ years as compared to 20% direct   "A lot of odd lots have been created, which is preventing investors from trading in them. The market-making framework, the underwriting system, is not working well and costs are increasing. There are migration issues too," he noted.    In this backdrop, Sebi will bring out a comprehensive reform proposal, Pandey said.  Global fund management from India   The regulator is also taking steps towards supporting global fund management activity from India.   A lot of changes had already happened in the tax laws, he said, but noted that there were certain issues related to portfolio management (PMS) regulations and the regulator has proposed easing of these requirements.   "There is a lot of talent in India, and that talent is being used. But the point is they need not have to be in Singapore or elsewhere to trade in the global markets," Pandey said.   While the funds can still be offshore, fund management decisions can happen from India, which Pandey believes will encourage many talented people here to take up global trading.

MUST READ: NRIs, OCIs can complete SEBI KYC from abroad: What changes under new proposal?  Responsible use of AI   The Sebi chairman once again has stressed the responsible use of new technology like Artificial Intelligence and machine learning in capital markets, and the regulator is shortly going to issue guidelines for the same.   "These guidelines will provide for a tiered approach, with emphasis on clear accountability and governance controls. The framework shall require a kill switch, and humans-in-the-loop controls along with data controls," the chairman said.   The aim is to balance innovation with investor protection, he stressed. According to him, technology must strengthen market infrastructure and regulatory oversight.   Sebi is examining an IT resilience index for market infrastructure institutions (MII) to provide an objective framework for assessing the resilience of critical systems. It is also working with MIIs to expand API based connectivity and interoperability, Pandey informed.   The regulator is likely to release a fresh study on trading in the futures and options market for the financial year 2025-26 on Thursday, August 20. Sebi has been releasing such data for some time now, pointing to how most retail traders were making losses. Several measures have also been taken to curb F&O trading.    Data that was disclosed in Parliament recently noted that net losses of individuals in the equity derivatives segment had reduced, although the average per-person loss had slightly gone up. 

MUST READ: SEBI NRI onboarding reform may unlock more foreign capital for Indian markets, says Nithin Kamath