Sebi plans to set up a Cyber Security and Compliance Reporting System for the regulated entities that will collaborate with government as well as other national and international regulators to tackle such vulnerabilities, the capital markets watchdog said in its annual report for 2018-19.
Besides, a Cyber Capability Index will be developed to assess the cyber security preparedness and resilience of the market infrastructure institutions (MIIs), which include stock exchanges, clearing corporations and depositories, Securities and Exchange Board of India (Sebi) said.
Such Index will not only improve the oversight of cyber security implementations, but will also help to gauge the level of implementation of the guidelines issued by Sebi from time to time, it added.
"Sebi has envisaged three-tier structure in securities market to monitor cyber security related events and take action as deemed necessary in the interest of the securities market," the annual report noted.
Further, the regulator plans to ask stock exchanges to enhance their analytical capabilities so as to improve the analysis of filings done by the listed companies in XBRL format -- an electronic format for communication of business and financial data.
"A smooth and uninterrupted functioning of operations of the MIIs is essential for ensuring the continuity of the securities market. It is therefore very crucial for the MIIs to constantly monitor the performance of its systems and upgrade/ enhance its systems to avoid any possibility of technical glitch," Sebi said.
Based on experience from the technical glitch incidents at MIIs in the past, the regulator plans a framework for timely and adequate reporting of such incidents, as well as a penalty mechanism to act as deterrence.
Sebi plans to deploy data analytics and new generation technologies to deal with various challenges in the market. Also, it aims to develop a technology based inspection methodology for the regulation of various intermediaries in the securities market.
"A project is currently underway to ingest data from various intermediaries into the Sebi database and develop algorithms in order to generate instances of breaches of regulatory guidelines along-with alerts on possible non-compliances," the markets watchdog noted.
The regulator would also encourage adoption and usage of financial technology to further develop and maintain an efficient, fair and transparent securities market ecosystem, Sebi added.