India’s market regulator Sebi is preparing to introduce new guidelines for AI-driven trading systems as concerns grow over cyber security risks in financial markets.
Sebi Chairman Tuhin Kanta Pandey said the increasing use of artificial intelligence in trading and financial systems has created new vulnerabilities that could threaten market stability if not properly controlled.
The upcoming advisory will focus on protecting stock market systems, brokers, and other regulated entities from cyber threats linked to AI technology.
Why Sebi Is Concerned About AI
According to Pandey, cyber attacks can spread very quickly if weaknesses are found in software systems powered by AI.
He warned that if hackers exploit such vulnerabilities, it could affect market integrity and create serious risks for investors and financial institutions.
Recently, Sebi had already issued an advisory related to AI-based vulnerability detection tools, including a model called Mythos developed by Anthropic.
The regulator asked market participants to immediately update their systems with the latest security patches to reduce cyber risks.
The launch of advanced AI tools capable of identifying software weaknesses has raised global concerns about how such technology could be misused on a large scale.
Municipal Bonds Could Become Important for Cities
Speaking at an event organised by the Association of Mutual Funds in India (AMFI) in Odisha, Pandey also highlighted the growing importance of municipal bonds in India.
He said municipal bonds can help cities raise long-term funds for projects like:
Water supply
Public transport
Sanitation
Waste management
According to Sebi, 22 urban local bodies across India have already raised more than Rs 4,500 crore through municipal bonds by FY26.
The regulator is also planning reforms to make fundraising easier for cities and allow multiple urban local bodies to raise funds together.
More Indians Are Entering the Stock Market
Pandey said investor participation in India’s securities market has grown rapidly in recent years.
India now has around 145 million unique investors, compared to just 38 million in FY19.
In Odisha alone, the number of market investors has increased more than ten times since FY15.
Despite this growth, only 9.5% of Indian households currently invest in market-linked products, even though awareness about investing has improved significantly.
Sebi Pushes Long-Term Investing and Financial Literacy
The Sebi chairman also encouraged people to start investing early and remain invested for the long term.
He said even small monthly investments through SIPs can create wealth over time because of compounding.
According to him, investors can begin with as little as Rs 250 per month in mutual funds.
Sebi is also working with the Ministry of Panchayati Raj to improve financial literacy at the grassroots level.
In FY26 alone, the regulator conducted over 41,000 investor awareness programmes across the country, reaching more than 22 lakh people.
