SEBI Issues CONSULTATION PAPER
FinTech BizNews Service
Mumbai, June 20, 2025: SEBI today issued consultation paper on ‘Guidelines For Responsible Usage Of AI/Ml In Indian Securities Markets.’ This is to solicit comments from stakeholders and members of public on the proposed guiding principlesfor responsible usage of Artificial Intelligence (AI)/Machine Learning (ML) applications/models in securities markets. These guiding principles are intended to optimise benefits and minimise potential risks associated with integration of AI/ML based applications in securities markets to safeguard investor protection, market integrity, and financial stability.
SEBI has prescribed reporting requirements for Artificial Intelligence (AI) and Machine Learning (ML) applications and systems offered and used by Stock Exchanges, Clearing Corporations, Depositories, Intermediaries and Mutual Funds. The intent of the circulars was to create an inventory of the AI / MLlandscape in the Indianfinancial markets to gain an in-depth understanding of the adoption of suchtechnologies in the markets and to ensure preparedness for any AI / MLpolicies that may arise in the future.2.2Further, it has been observed that the usageof AI and MLbased applications/modelshavegreatly increased in the financial markets because of better availability of data and computationalpower, coupled with significant improvements in software and hardware. Further, the field of AI/ML has seen significant advancement due to development of Generative AI (Gen AI) and Large Language Models(LLMs), which has opened up new use cases in financial sector for market participants. AI/ML is being used by market participants mainly for advisory and support services, risk management, client identification and monitoring, surveillance, pattern recognition, internal compliance purpose, cyber securityetc. While AI/ML has the potential to improve productivity, efficiency and outcome, it is also important to manage these systems responsibly as their usage also createsor amplifies certain risks which could have an impact on the efficiency of financial markets and may result in adverse impact to investors. Therefore, SEBI considersit appropriate to devise high-level principles to provide guidance to the market participants for having reasonable procedures and control systems in place for supervision and governance of usage of AI/ML applications/tools. This consultation paper enumerates various emerging risks across several dimensions such as Fairness and Bias, Accountability and Governance, Transparency and Explainability, Monitoring and Operational Resilience, Oversight of third-party vendors, Cyber and Data Security etc.and guiding principlesfor mitigating those risks.2.3In order to study and prepare guidelines for usage of AI/ML applications in the Indian Securities Market, SEBI constituted a working group.
RECOMMENDATIONS OF THE WORKING GROUP
The working group gave its recommendations to implement appropriate guardrails, continuous monitoring and human-in-the-loop throughout the development and deployment lifecycle for responsible usage of AI/ML in securities markets. The report of Working Group was placed before Committee on Financial and Regulatory Technologies (CFRT)of SEBI. This consultation paper has been prepared based on the recommendations of the Working Group, suggestions of CFRT, discussions with market participants and internal deliberations. These guidelines are broadly based on following core guiding principles for responsible usage of AI/ML:5.1Model Governance5.2Investor Protection-Disclosure5.3Testing framework 5.4Fairness and bias5.5Data Privacy and Cyber Security measures.
Click to read more details : https://www.sebi.gov.in/reports-and-statistics/reports/jun-2025/consultation-paper-on-guidelines-for-responsible-usage-of-ai-ml-in-indian-securities-markets_94687.html
