Sebi to leverage data analytics to detect fraud and other anomalies

Bengaluru, 4 September Market regulator Securities and Exchange Board of India (SEBI) is planning to detect frauds and other forms of market manipulations in the stock exchanges by leveraging emerging technologies like data analytics.

To achieve this objective, Sebi has shortlisted IT services firms-Tata Consultancy Services (TCS), Wipro, Capgemini Technology Services, L&T Infotech and NEC Corporation India for implementing data analytics-based software to detect fraud and alert the regulator to take corrective measures and levy penalties.

Currently, Sebi acquires data from external entities such as exchanges, depositories, RTAs, and news on a daily basis. The regulator is in the process of implementing a Data Lake which will host the data and analytical environment on which the data analytics models will be deployed to develop an early warning system.

The project will implement Data Analytics Projects and build Data Models to leverage artificial intelligence and machine learning.

The shortlisted IT vendor will implement the new project, which is expected to be completed in 12 months from the date of signing of the agreement.

This technology-upgradation will be able to check the freak trades seen in the futures and options segments. Currently, while the cash segment of equity markets has enough safeguards including price filters and surveillance measures, such curbs aren't present for derivatives, making it prone to market manipulations.

The new solution will enhance the current system to track abnormal trading behaviour through trading pattern analysis at both member and client level.

The system will also provide alerts for block deal trades, prevent circular trading besides spoofing — a form of market manipulation whereby a trader places one or more highly-visible non-bonafide orders to mislead the true value of the stock.