SEBI issues directive to stock brokers, depository participants using AI

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Apart from just, they also need to report in a prescribed format about the implementation of the ML and AI system, safeguards in place to prevent the abnormal behavior of the ML and AI application and whether the system disseminates investment or the trading advice or the name or strategies of the application, according to the SEBI regulatory. “
With effect from quarter ending March 2019, registered stock brokers/ depository participant using AI / ML-based application or system… are required to fill in form and make submissions on quarterly basis within 15 calendar days of the expiry of the quarter,” SEBI said.

The stock brokers and depository participants which is using the applications based on the Artificial Intelligence and Machine learning will be going to make quarterly disclosures on their compliance with the cybersecurity framework, according to the report.

The directive comes just after the regulator which is observed that the Artificial Intelligence and Machine learning system which are black boxes and their behavior cannot be easily quantified.

“It is imperative to ensure that any advertised financial benefit owing to these technologies for products offered by intermediaries should not constitute to misrepresentation,” SEBI said in a circular.

The market directed as of now the depository participants and the stockbrokers using the applications which are based on the Machine Learning and Artificial Intelligence to inform about its system whether it surely adheres to the regulator cybersecurity framework or not just among the others.

Apart from just, they also need to report in a prescribed format about the implementation of the ML and AI system, safeguards in place to prevent the abnormal behavior of the ML and AI application and whether the system disseminates investment or the trading advice or the name or strategies of the application, according to the SEBI regulatory.

“With effect from quarter ending March 2019, registered stock brokers/ depository participant using AI / ML-based application or system… are required to fill in form and make submissions on quarterly basis within 15 calendar days of the expiry of the quarter,” SEBI said.

In a separate circulator, SEBI revealed to harmonize the procedures for the transformation of securities in the dematerialized mode with that of the transmission of the securities in the physical mode, transmission of securities would be a great dealt in line with the Listing Obligations and Disclosure Requirements regulations.