Sebi moves to tighten short-selling rules, launch AI sandbox and boost bond market-making

At the 16th International Capital Market Convention in Mumbai, Sebi chairman Tuhin Kanta Pandey detailed a series of reforms. Short-selling and securities lending-borrowing rules will be revisited to enhance price discovery while preventing terminal abuse. Inspection portals will be merged into one digital system for faster supervision, and an AI sandbox will let innovators trial tools under regulated safeguards such as kill switches and human oversight.

The board is finalising guidelines on responsible AI use, aligned with IOSCO recommendations. Additionally, Sebi is crafting a market-making framework to stimulate secondary trading in corporate bonds and considering graded compliance for brokers based on scale and tech reliance. Extensions of the automated give-up and take-up facility to custodial clients like PMS and AIFs aim to free up funds and margins.