The committee will guide the regulator to develop and maintain cyber security and cyber resilience requirements aligned with global best practices and industry standards, Tyagi said at the 15th annual capital market conference organized by industry body Ficci in Mumbai on Tuesday.
The regulator is also working on ways to enhance market integrity. As a first step, Sebi has strengthened the framework for algorithmic trading, Tyagi said.
“To further strengthen the rules to deter financial crimes like frauds, market manipulations and insider trading, the fair market conduct committee constituted by Sebi ( headed by Dr T.K. Viswanathan, formerly union law secretary), has submitted its recommendations which have been put in the public domain seeking comments. A view on these recommendations will be taken soon," said Tyagi.
Sebi is also focusing on enhancing its in-house analytics capability. Its surveillance system already has an embedded data warehouse and business intelligence system. For better analytics, Sebi has invited expressions of interest from companies, Tyagi said. The shortlisted company will help Sebi set up a private cloud to provide infrastructure, storage and computing capacity to upcoming Sebi projects, Tyagi said.
“Technology use in the financial sector is already disrupting the traditional regulatory tools, forcing regulators to keep pace with the changes. Going forward, increase in use of machine learning and artificial intelligence among other technologies, in the capital markets is a writing on the wall. The complexities in the capital markets are only going to increase with time. Sebi needs to quickly upgrade its regulatory capacity to properly comprehend the nuances of technological changes with a view to staying ahead of the curve," said Tyagi.
The Sebi chief urged market stakeholders to improve their standard of conduct and benchmark it against the best in the world.
“...Integrity of the markets should be non-negotiable so that it gives a high degree of comfort and confidence to investors. Also, there should be adequate competition, with frictionless ease of doing business for all stakeholders," said Tyagi.
In this regard, Tyagi reiterated how Sebi, in the last one year, worked on improving corporate governance standards in listed firms by incorporating some of the recommendations made by a committee headed Uday Kotak.
“For instance, Sebi enhanced the focus on independent directors, prescribed separation of posts of CEO/MD and chairperson; enhanced role of the audit committee, nomination and remuneration committee and risk management committee; strengthened approval and disclosure of related party transactions (RPTs); mandated disclosure of consolidated quarterly results w.e.f. from fiscal 2020; and made secretarial audit for listed entities and their material unlisted subsidiaries mandatory," said Tyagi.
Sebi will continue to focus on enhancing governance standards be it for issuers, intermediaries or market infrastructure providers, according to the Sebi chief.
“ In the next wave of capital markets growth, apart from the traditional markets i.e. equity, bonds, and currencies, we expect a lot more focus on the commodity markets. In this context, integration of commodities and securities derivative markets and introduction of new products, including option and index products in the commodity derivatives space is an area which have been actively engaging our attention,"said Tyagi.
The Sebi chairman feels that in order to improve market-based financing, the corporate bond market is required to play an increasingly important role.
“Further development of a liquid corporate bond market through trading of securitized receipts, increased participation of domestic institutional investors and taking operational measures will continue to engage the attention of Sebi going forward," said Tyagi.
The Sebi chief said the country’s macroeconomic outlook is expected to improve in the next two fiscal years as the regulators attempt to address the twin balance sheet problems of the corporate and banking sectors.
“IMF also projects an overall favourable macroeconomic outlook for India and expects economic growth to rise to 7.3% in fiscal 2019 and 7.5% in FY2020 with strengthening of investments and a robust private consumption," said Tyagi.
However, rising global oil prices, tighter global financial conditions, spillover risks from a global trade conflict, and rising regional geopolitical tensions will pose significant risks to the economy, Tyagi said.