India’s top markets regulator, the Securities and Exchange Board of India, is set to release an advisory aimed at addressing the growing risks associated with artificial intelligence in financial markets.
The upcoming guidance will focus on how intermediaries—including brokers, asset managers, and trading platforms—should manage the evolving challenges posed by AI-powered systems.

Focus on Advanced AI Tools and Market Impact

Regulatory attention has intensified following the rapid adoption of advanced AI platforms such as Anthropic Mythos and other generative technologies. These tools are increasingly being integrated into trading strategies, research workflows, and client-facing services.
While AI offers efficiency and analytical advantages, it also introduces risks such as misinformation, model bias, lack of transparency, and potential market manipulation if left unchecked.

Industry Consultation Underway

SEBI has been actively consulting with financial institutions and technology stakeholders to better understand how AI is being deployed across the capital markets ecosystem.
This collaborative approach reflects the regulator’s intent to balance innovation with risk management, ensuring that technological adoption does not undermine market integrity or investor protection.

Rising Need for Governance and Oversight

The move underscores a broader global trend in which regulators are racing to keep pace with AI adoption in finance. As machine-driven decision-making becomes more prevalent, concerns are growing around accountability, auditability, and systemic risk.
Market participants are expected to implement stronger governance frameworks, including monitoring AI outputs, validating models, and ensuring compliance with existing financial regulations.

Outlook for Market Participants

The advisory is likely to serve as an early framework for AI governance in India’s financial markets, potentially paving the way for more formal regulations in the future.
Firms that proactively adapt to these expectations—by strengthening internal controls and transparency—may be better positioned to navigate the evolving regulatory landscape while continuing to leverage AI-driven innovation.