AI in action · Regulation
India's Market Regulator Says AI Guidelines With Kill Switches and Human Oversight Are Coming: "Technology Cannot Dilute Accountability"
SEBI chairman Tuhin Kanta Pandey told the Capital Market Confluence in Mumbai on October 10, 2026 that the regulator will shortly issue guidelines on the responsible use of artificial intelligence and machine learning in capital markets, with a tiered approach built on accountability, data controls, kill switches and human oversight, aligned with IOSCO's supervisory toolkit. Regulated entities, he said, remain responsible for AI outcomes, data quality, model governance and cyber resilience. India has more than 150 million unique investors and a market capitalisation near 472 lakh crore rupees, and brokers there already run algorithmic order flow under a framework that puts the liability on the intermediary. Reports that the rules will arrive by late November are unconfirmed.
The world's largest retail options market is about to get AI rules, and its regulator has said in advance where the liability will sit. Speaking at the second Capital Market Confluence, organised by the BSE Brokers' Forum in Mumbai on October 10, 2026, Securities and Exchange Board of India chairman Tuhin Kanta Pandey said SEBI will soon issue guidelines for the responsible use of AI and machine learning in capital markets. The framework, he said, will take a tiered approach covering accountability, data controls, kill switches and human oversight, and will align with the supervisory toolkit for AI that IOSCO, the global body of securities regulators, published in May, so that governance can be adjusted as the technology changes. "Technology cannot dilute accountability," he said; regulated entities remain responsible for AI outcomes, data quality, model governance and cyber resilience, and human oversight must stay clear as technology changes both market operations and supervision.
The context is scale. Pandey put India's market capitalisation at around 472 lakh crore rupees, roughly $5.3 trillion, with more than 15 crore, or 150 million, unique investors, mutual fund assets near 87 lakh crore and outstanding corporate bonds of about 61 lakh crore. Indian exchanges have for years carried the world's largest volumes in equity index options, much of it retail and an increasing share of it placed through brokers' algorithmic and API order flow under rules that make the broker responsible for every order its systems send. An AI framework that keeps the intermediary liable for the outcome is a continuation of that approach, and a kill-switch requirement is one the exchanges already impose on algorithmic trading members. What is new is extending both to systems that reason rather than follow a coded rule.
Pandey's speech was about more than AI. He said the regulator is reviewing comments on a consultation paper about derivatives settlement prices on expiry days, after an assessment of the closing auction session, with guidelines expected within about a week; that tender offers, buybacks and offers for sale will move into the interoperability framework by the end of November; and that SEBI received more than 400 comments on simpler digital onboarding for non-resident investors. Some reports have said the AI guidelines are expected by late November; SEBI has not confirmed a date, and there is a public consultation paper on the subject that readers can check against the final text when it arrives.
Set against the month's other regulators, SEBI's position is the firmest on one point. The FCA has chosen persuasion and near-miss reporting; the US bank supervisors are asking questions; Singapore and Hong Kong have published guidance with a year or more to comply. India's regulator has said that the firm which deploys the model answers for what it does, in a market where the firms are brokers executing for 150 million retail accounts and the models will increasingly be agents placing orders on those accounts' behalf. When the guidelines arrive, the clause to read first is the one on human oversight, because it will define, for the largest retail derivatives market on earth, whether a human must approve an agent's order or merely be able to stop it.
Sources: The Tribune — SEBI to issue AI, machine learning guidelines shortly; eyes expiry-day settlement rules within a week: Tuhin Kanta Pandey (Oct 10, 2026); Outlook Money — Sebi to Unveil AI and ML Regulations Mandating Kill Switch and Human-in-the-Loop Controls (Oct 2026); IOSCO — Final Report: Supervisory Toolkit for AI Use in Capital Markets (FR/02/2026, May 2026)