Securities and Exchange Board of India
Nov 19, 2019
PR No.: 23/2019
“Technology a key game changer in Financial Services” – Shri Ajay Tyagi
“Technology is a key game changer in financial services as it can not only provide fast and better services to the consumer, it can also be a catalyst in improving the ease of doing business”, said Shri Ajay Tyagi, Chairman, SEBI while participating in a panel discussion on “Technology in Financial Services” at Singapore on November 16, 2019. The panel discussion was part of the 4th South Asian Diaspora Convention organized by the Institute of South Asian Studies (ISAS) at the National University of Singapore. The panel was chaired by Mr. Vinod Rai, former Comptroller and Auditor General of India. Other panelists in the panel were Mr. Sopnendu Mohanty, Chief Fintech Officer, Monetary Authority of Singapore and Ms. Anne Lochoff, Senior Advisor, Global Centre for Technology, Innovation and Sustainable Development, United Nations Development Programme, Singapore.
Giving the examples of shifting of trading to screen based electronic trading from an open outcry system, dematerialisation of securities, T+2 rolling settlement, Integrated surveillance system, online complaint redress system of SEBI (SCORES), KYC registration agencies (KRAs) and the recent introduction of inter-operability of clearing corporations, Shri Tyagi said “the Indian securities market has always been at the forefront in embracing technological advancement keeping pace with the developed securities market in the world”.
Elucidating further, Shri Tyagi said that “newly emerging technologies like Artificial Intelligence (AI) machine learning (ML), deep learning, etc. are being used in Indian capital markets in areas like Robo advisory services, surveillance through social media analytics, IT security, etc. “
“New technologies like Distributed Ledger Technology (DLT), Robotic Process Automation (RPA), and Natural Language Processing in various fields of securities markets like clearing and settlement, risk management, surveillance, compliance automation etc. are increasingly being considered and tested globally”, he added.
“SEBI’s approach has been to encourage and improve capacity building and innovation while being aware of the possible associated risks and managing them. SEBI does not prescribe the type of technology to be deployed by intermediaries for carrying out their functions/providing their services, and its regulations are technology agnostic”, Shri Tyagi said. “However, to safeguard against the associated risks in newer technologies, robust cyber security framework based on IOSCO principles has been specified for market infrastructure institutions and intermediaries”, he added.
On challenges, Shri Tyagi said, “there are broader challenges, including compliance requirements, not restricted only to capital markets”. “Globally, many data localization and data privacy laws such as GDPR have come into force. In India too, Personal Data Protection Bill, is being introduced in the Parliament”.
Shri Tyagi pointed out that, “Due to advancement in technology, funds and securities can now flow across the world in few microseconds. This enables setting up of complex global structures which could be potentially misused for tax avoidance, money laundering, round tripping, etc.” “Such transactions are now increasingly being structured at a global level while the data available with regulators/governments is largely local. The information exchange between global regulators/ governments is not as easy & free-flowing as easy it is to structure such transactions. This has created enforcement issues”, he added.
Enumerating some of the steps taken by SEBI to encourage and facilitate financial technology in securities markets, Shri Tyagi said that “SEBI has (1) Set up a Committee on Financial and Regulatory Technologies (CFRT) to advise SEBI on ways to reap the opportunities provided by FinTech, while also dealing with the relevant risks and challenges (2) Enabled an Innovation sandbox to facilitate development and adoption of innovative FinTech solutions in securities market by entities not regulated by SEBI. A framework to provide a testing environment for FinTech firms has also been specified. (3) Proposed a Regulatory sandbox for facilitating SEBI regulated entities to experiment with FinTech solutions in a live environment and on real customers. A draft framework which was issued for public consultation is being finalized.”
Highlighting the use of technology in SEBI’s functioning, Shri Tyagi said that “SEBI not only encourages technological innovation in securities markets, it also uses and regularly updates technology in its own functioning and plans to spend INR 5 billion on IT projects in the next 5 years “. “SEBI plans to have its own private cloud to have a common IT infrastructure for all of SEBI’s IT infra needs which is readily scalable as well as has systems with open standards compatible with any technology”, he added. “A Network Operations Centre (NOC) for continuous monitoring of the smooth functioning of the SEBI IT network and Securities Operations Centre (SOC) to detect and mitigate cyber-attacks on SEBI’s IT infrastructure in efficient and effective way, are under implementation, and are expected to be in place by the end of this year”, he said. “SEBI has also planned Data lake project to augment analytical capability at SEBI with advance analytical tools as AI/ML, deep learning, big data analytics, pattern recognition, processing of structured and unstructured data, text mining and natural language processing ,etc., Shri Tyagi said.
A very welcome initiative indeed by SEBI under the Chairmanship of Shri Tyagi. The setting up of NOC and SOC and attention by SEBI towards market conditions of Fintech firms would greatly help the growth of Corporate India’s financial ecosystem and thus its reach, strength and impact.
Inclusion of AI, ML and Deep Learning has been helping banks for quite some time now and their benefits and their impact will only increase and reach more businesses.
Owing to rapid changes in financial ecosystem in the country and which is likely to multiply in coming times, a greater focus on inclusion of relevant IT curricula in syllabus of finance professionals (eg. CA/CS/CMA among others) would help to maintain growth and prevent mismatch of knowledge/understanding between such professionals and business owners/managers.
As a student of CA, I can see we are living in exciting times, which will only grow by the time I graduate.