Social media platforms have emerged as key tools of market manipulation, said SEBI chairman Ajay Tyagi.
Speaking at the National Institute of Securities Markets (NISM) research conference, here on Thursday, Tyagi said: “Social media platforms are increasingly being used for market manipulation. Regulators worldwide are increasingly acknowledging that there is more surveillance input that can be gained from monitoring social media platforms.”
According to Tyagi, surveillance capabilities can be greatly augmented by the use of new technologies such as natural language processing (NLP), artificial intelligence (AI), and big data analytics. Tools such as AI and blockchain have the potential to bring a paradigm shift in the securities markets, he said.
Giving a peek into how the market landscape was changing for regulators, Tyagi said that the blockchain technology could be used for clearing, settlement and record-keeping, as the technology allows maintaining records in distributed ledgers, even while being a single source of truth.
“Some domestic exchanges are already developing blockchain-based solutions for KYC record-keeping purposes,” said Tyagi.
New risks, recurring stress
Another important change in the securities market is the emergence of new risks and recurring stress periods. Citing the example of the Depository Trust and Clearing Corporation (DTCC) successfully closing out the over $500-billion Lehman Brothers’ exposure to market participants without any spillover to either the clearing house’s balance sheet or to its clearing fund, Tyagi reiterated the importance of risk management.
“Regulators, however, also need to strike a balance between conservative risk management and market development, as very high level of safety usually comes at the cost of liquidity in the markets,” he added.
On SEBI’s efforts to analyse structured and unstructured market data, he said that work on the new ‘Data Lake’ project is on. The project will acquire technologies to help augment analytical capabilities with advanced AI/ML tools, pattern recognition, text mining and big data analytics.