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Harmonising AI/ML Oversight in India's Securities Markets: A Comprehensive Framework

Strategic Insights

— 1 min read

As India's securities markets increasingly incorporate Artificial Intelligence (AI) and Machine Learning (ML) technologies, the Securities and Exchange Board of India (SEBI) has introduced a structured reporting framework to ensure transparency, audibility, and accountability in AI/ML-based systems. The framework, introduced in 2019 and progressively refined through 2025, has evolved into a cohesive, harmonised model balancing innovation with oversight.

Key Takeaways:

  • SEBI introduced Circular No. SEBI/HO/MIRSD/DOS2/CIR/P/2019/10 on January 4, 2019, directing recognised exchanges to establish a uniform supervisory framework for AI and ML systems used by intermediaries.
  • By April 2019, the Metropolitan Stock Exchange (MSE) had digitised the process, requiring filings through the Exchange's Enhanced Supervision Portal with internal validation and approval before submission.
  • In December 2023, MSE issued Circular No. MSE/MEM/14585/2023, substantially broadening the reporting framework to include predictive, analytical, and pattern-recognition algorithms across front-office, mid-office, and back-office functions.
  • The National Stock Exchange (NSE) introduced a cross-exchange reporting mechanism in July 2025, which was formally adopted by MSE through Circular No. MSE/MEM/17921/2025, dated October 7, 2025, clarifying operational responsibilities for multi-exchange members.
  • Trading members using algorithmic software are required to report the use of AI or ML systems for each half-yearly cycle, regardless of whether such systems are developed in-house or procured from third-party vendors.
  • Members who do not use AI or ML must make a formal NIL declaration confirming non-use during the reporting period, and submissions must be made online through the Enhanced Supervision Portal.

Statistics:

  • As of January 2025, AI/ML reporting covers over 95% of recognised exchanges in India, including NSE, BSE, MSE, MCX, and NCDEX.
  • 75% of trading members have fully digitised their submissions, utilising the Enhanced Supervision Portal for filings since April 2019.
  • The harmonised reporting mechanism, introduced in 2025, has reduced duplication and simplified compliance for firms operating across multiple trading platforms.
  • Trading members have submitted over 23,000 AI/ML declarations from June 2023 to September 2024.

Sources:

  • [1] SEBI/HO/MIRSD/DOS2/CIR/P/2019/10 (Jan 4, 2019)
  • [2] MSE/MEM/14585/2023 (Dec 2023)
  • [3] MSE/MEM/17921/2025 (Oct 7, 2025)
  • [4] IndiaLaw LLP, "India's AI/ML Regulatory Framework: Evolving Towards Transparency and Accountability" (2025)

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