India’s market regulator, the Securities and Exchange Board of India (SEBI), is turning to artificial intelligence (AI) and machine learning to detect suspicious trading, social media misinformation and possible market manipulation.
The progress comes as increasingly complex financial markets put pressure on traditional surveillance systems.
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SEBI Uses AI to Track Trading, Derivatives and Social Media
Officials at the Securities and Exchange Board of India (SEBI) are using AI tools to scan large volumes of stock and derivatives data, algorithmic trading identifiers and other market activity for unusual patterns, according to people familiar with the matter.
The regulator is also tracking suspicious stock tips and promotional posts on social media and online forums. It matches these with trading activity to identify possible pump-and-dump schemes.
The technology recently helped flag suspicious activity linked to a newly launched closing auction mechanism. SEBI launched enforcement action against a JPMorgan Chase unit six days after the surveillance alert, according to a person familiar with the matter. An AI and machine-learning alert was among the factors behind the case. SEBI later lifted the trading ban after impounding alleged illegal gains, while the investigation continues.
SEBI’s wider AI push comes as the market deals with nearly $4 trillion in notional derivatives trades, sophisticated high-speed trading and a growing volume of social media commentary and misinformation.
Experts say that machine learning has also helped generate more targeted alerts and cut parts of the initial public offering review process by as much as 70%.
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SEBI Expands AI Capabilities But Keeps Humans in Control
SEBI has expanded its engineering and analyst team to more than 200 people from about 20 five years ago.
The regulator also makes up to 7,000 requests a month to platforms including X, Instagram and Telegram to remove misinformation. That is about 40% higher than pandemic-era levels. More than 100,000 videos have been removed across networks, according to a person familiar with the matter.
The AI effort dates back to 2019, when SEBI began investing in a local data centre at its Mumbai headquarters. SEBI deployed its in-house AI tool, Sudarshan, in 2021. Early versions faced problems with large language models producing inaccurate outputs.
Data poisoning remains another concern, particularly because external sources such as social media can contain bot-generated content. Limited access to graphics processing units is also restricting the regulator’s ability to scale its systems.
SEBI therefore continues to require officials to review AI-generated outputs and adjust them where necessary, so regulatory decisions remain compliant and legally defensible.
For the market, the message is clear: AI is becoming another surveillance tool, but human oversight remains central to how SEBI investigates potential misconduct.
SEBI’s expanding use of AI points to a broader shift in financial regulation: as trading strategies and online market activity become harder to monitor manually, surveillance systems are increasingly being built to spot patterns at scale. At the same time, final regulatory judgement remains with people.
Samarjit Kaur is a journalist and communications professional covering technology & emerging digital trends. With a focus on clarity and context, she reports on developments shaping industries and governance. When not reporting, she chooses to plug-in and relax on her playlists and plan her next bucket-list trips!
