The Securities and Exchange Board of India (SEBI) is using its 'Sudarshan' AI platform to identify market manipulation and monitor suspicious trading activity. As trading volumes surge, the regulator is actively flagging fraud on social media. While the AI speeds up investigations, SEBI continues to rely on human oversight to ensure legal accuracy in enforcement actions.
The Securities and Exchange Board of India (SEBI) is scaling up its use of artificial intelligence to maintain market integrity as Indian trading volumes reach record levels. With trillions in notional value moving through the derivatives segment and a retail investor base that has grown to 140 million, the regulator has significantly expanded its technical team to over 200 engineers and analysts. This infrastructure upgrade is designed to manage the massive influx of data and high-speed algorithmic trading that defines today's stock market.
How Sudarshan Monitors Trades
At the core of this strategy is an in-house AI platform called Sudarshan, which launched in 2021. The system scans through large volumes of trading data, including derivative positions and algorithmic order identifiers, to find patterns that do not align with normal market behavior. In recent enforcement cases, this technology has proven useful in investigating suspicious activity during closing auctions. By automating the preliminary detection phase, SEBI can now build enforcement cases in days rather than the months or years previously required.
Crackdown on Social Media Manipulation
The regulator has also expanded its technological reach to curb misinformation and manipulation on social media platforms. Platforms like Telegram, Instagram, and X are often used to spread tips for pump-and-dump schemes. SEBI now processes approximately 7,000 removal requests every month to address such content. This volume marks a 40% increase compared to pre-pandemic levels, with over 100,000 scam-related videos and posts removed to protect retail investors from potential fraud.
Limitations of AI Oversight
While AI provides a significant advantage, the regulator faces practical hurdles in its digital transformation. One major concern is data poisoning, where bad actors attempt to input false information to mislead the models. Additionally, the regulator faces hardware constraints, specifically in sourcing the high-end graphics processing units needed to handle increased computational demands. To mitigate these risks, SEBI mandates that every alert generated by the system must undergo human review before any enforcement action is taken. The regulator maintains that these advanced tools serve as an assistant to enhance productivity rather than acting as an independent decision-maker, ensuring that all actions taken remain legally sound for the Indian financial system.