India’s capital markets continue to grow in size, complexity, and technological dependence. On December 21, 2025, the Securities and Exchange Board of India (SEBI) announced plans to form a dedicated working group on exchange technology. This move marks a strategic shift in how the regulator approaches market stability, cyber resilience, and operational efficiency.
As trading volumes rise and market participation expands, technology no longer plays a supporting role. Technology now forms the backbone of India’s stock market ecosystem. SEBI’s decision reflects an understanding that modern market risks originate as much from digital vulnerabilities as from financial imbalances.
Why SEBI Needs a Technology Working Group
India’s stock exchanges process millions of orders every second. Algorithmic trading, high-frequency strategies, real-time risk management systems, and digital settlement platforms define daily operations. Any disruption in these systems can trigger widespread consequences.
SEBI aims to proactively address such risks instead of reacting after failures occur. The regulator recognizes that evolving technologies demand continuous oversight, expert evaluation, and coordinated responses across institutions. A focused working group allows SEBI to study emerging challenges in depth and recommend forward-looking solutions.
Recent years have highlighted the importance of robust technology governance. Market outages, cyber threats, data integrity concerns, and third-party system dependencies continue to rise globally. SEBI intends to ensure that India’s markets remain resilient, competitive, and trusted.
Core Objectives of the Working Group
SEBI expects the technology working group to perform several critical functions. First, the group will review existing exchange technology frameworks. This review includes trading engines, surveillance systems, clearing and settlement infrastructure, and disaster recovery mechanisms.
Second, the group will identify operational vulnerabilities. These vulnerabilities may arise from outdated systems, excessive concentration of service providers, or insufficient stress testing. The group will assess how exchanges manage peak load scenarios, sudden volatility spikes, and systemic shocks.
Third, the working group will recommend best practices. These practices will align Indian exchanges with global standards while respecting domestic market realities. The group will focus on scalability, redundancy, data security, and real-time monitoring.
Finally, the group will advise SEBI on regulatory enhancements. These recommendations may influence future guidelines, compliance requirements, and supervisory frameworks.
Focus on Cybersecurity and Data Protection
Cybersecurity ranks among SEBI’s top concerns. Stock exchanges store sensitive financial data, trading algorithms, and investor information. Any breach can damage market confidence and financial stability.
The working group will evaluate cybersecurity preparedness across exchanges and market infrastructure institutions. It will analyze firewalls, intrusion detection systems, encryption protocols, and access controls. The group will also examine how exchanges manage insider threats and vendor risks.
Data protection forms another major priority. Market participants rely on accurate, real-time data for decision-making. The working group will review data governance policies, backup systems, and audit trails. It will also assess compliance with evolving data privacy norms.
Managing Risks From Algorithmic and High-Frequency Trading
Algorithmic trading dominates modern markets. While algorithms improve liquidity and efficiency, they also introduce new risks. Faulty code, runaway algorithms, and feedback loops can destabilize markets within seconds.
SEBI’s working group will study how exchanges monitor algorithmic activity. The group will examine pre-trade risk checks, kill switches, and circuit breakers. It will also evaluate stress-testing procedures for extreme but plausible scenarios.
By strengthening controls around automated trading, SEBI aims to reduce systemic risk without stifling innovation. The working group will seek a balance between market efficiency and safety.
Ensuring Business Continuity and Disaster Recovery
Operational resilience requires more than cybersecurity. Exchanges must continue operations during hardware failures, natural disasters, and geopolitical disruptions.
The working group will assess business continuity plans and disaster recovery sites. It will analyze recovery time objectives, backup data centers, and redundancy arrangements. The group will also study coordination between exchanges, clearing corporations, and depositories during crises.
SEBI wants exchanges to demonstrate preparedness through regular drills, audits, and third-party assessments. The working group’s recommendations may push institutions to adopt higher resilience benchmarks.
Technology Governance and Accountability
Strong technology governance demands clear accountability. The working group will review governance structures within exchanges. It will examine board oversight, internal technology committees, and escalation mechanisms.
SEBI expects exchanges to assign responsibility for technology risks at senior management and board levels. The working group may propose clearer role definitions, reporting standards, and audit requirements.
Such measures aim to ensure that technology decisions align with long-term market integrity rather than short-term cost considerations.
Alignment With Global Best Practices
Global markets increasingly coordinate on technology standards. SEBI understands the importance of international alignment, especially as foreign investors play a major role in Indian markets.
The working group will study frameworks used by leading global exchanges and regulators. It will compare approaches to cyber resilience, operational risk management, and regulatory technology. SEBI intends to adopt suitable practices while tailoring them to India’s market scale and structure.
This alignment will enhance India’s credibility as a stable and sophisticated investment destination.
Impact on Market Participants
SEBI’s initiative will affect exchanges first, but the impact will extend to brokers, asset managers, and technology vendors. Enhanced standards may require system upgrades, stronger controls, and additional disclosures.
While compliance costs may rise in the short term, long-term benefits outweigh these expenses. A resilient market infrastructure reduces the risk of outages, losses, and reputational damage. Investors benefit from smoother operations, faster recovery during disruptions, and stronger confidence in market fairness.
Technology vendors will also face greater scrutiny. Exchanges may demand higher service levels, better security practices, and more transparent risk management from third-party providers.
A Forward-Looking Regulatory Approach
SEBI’s decision to form a technology working group signals a shift from reactive regulation to proactive governance. Instead of waiting for failures, the regulator aims to anticipate risks and shape outcomes.
This approach reflects the reality of modern markets. Financial stability now depends as much on code quality and system design as on balance sheets and capital adequacy.
By investing in technology oversight today, SEBI positions India’s markets for sustainable growth in the years ahead.
Conclusion
SEBI’s plan to establish a working group on exchange technology represents a critical milestone in India’s market evolution. The initiative acknowledges the central role technology plays in market integrity, resilience, and investor confidence.
Through focused analysis, expert guidance, and forward-looking recommendations, the working group will help strengthen the foundations of India’s financial system. As markets grow more complex and interconnected, such proactive measures will define the difference between vulnerability and resilience.
India’s stock markets stand at the intersection of innovation and responsibility. SEBI’s latest move ensures that technology serves as a source of strength rather than risk.
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