As there is no country in the world in terms of “margin protection” better than India where technology is extensively use to protect clients’ securities, Securities and Exchange Board of India (SEBI) chairperson Madhabi Puri Buch said.
The SEBI chief said that foreign investors often tell her that she was fortunate to have a culture of data and technology in the country, which makes the role of the capital market regulator effective.
Madhabi Puri Buch said in her lecture on ‘Data and Technology in the Capital Market’ :
“There is huge technology change in the entire market. It has never been done anywhere in the world ever…and we did it in India. So, today in terms of margin protection – the protection of client’s securities – there is nobody better in the world than India,”.
The event was organise by the Indian Institute of Management-Bangalore to mark its 49th Foundation Day celebrations.
Explaining how data is use for surveillance to check malpractices during trading, the SEBI chairperson said the study of algorithms and alerts makes it easy to study peoples’ trading patterns and identify ‘insider trading’.
SEBI has also embed a QR code which, Madhabi Puri Buch said, was quite radical.
When it is scan, one can see a video clip, which show the ‘Delta’ positions of the particular individual whose trading pattern is reflect.
Madhabi Puri Buch Said :
“You look at that film, and you say, ‘this is insider trading. This cannot be anything else’. So, we use data in our surveillance,”.
The regulatory body is also using technology to check ‘front running’ in the mutual fund market.
Madhabi Puri Buch said SEBI too had some setbacks because the regulation has not kept pace with technology but it is trying to fix the problem in the next few months.
The SEBI chief, Madhabi Puri Buch, said the board is now using ‘Suptech’ or Supervisory Technology as well to inspect and make sure that everybody’s following the rules.
Citing an example from the mutual fund industry, Madhabi Puri Buch said SEBI started collecting data from all the 44 mutual fund houses operating in the country.
As the data start coming in, SEBI told the industry that they are going to develop 80 algorithms and explain to them the logic and the interpretation of SEBI laws in the light of the algorithm emanating from the data.
As per Madhabi Puri Buch, many of her colleagues were quite upset as they were against revealing the algorithm and question the objective behind it.
Madhabi Puri Buch said she gave an explanation that satisfied them.
Madhabi Puri Buch Said :
“The objective of the regulator is not to catch people doing bad things but to prevent them doing bad things. So, we declared that we are now going to make these 80 algos,”.
SEBI conducts inspections every quarter, which otherwise could be done on a daily basis, because the board want to give industry time to find their own mistakes and fix them instead of showing up every day, Buch said.
Madhabi Puri Buch Said :
“Now, this is only the beginning because this is the easy stuff. So, what’s the tough stuff? The tough stuff is where you have to try and find violations of the spirit of the law, and not the letter of the law,”.
