SEBI Introduces Financial Penalties for Surveillance Failures in Stock Markets

SEBI has unveiled a new framework imposing financial penalties on stock exchanges and market infrastructure institutions for failing to detect abnormal trading activities. The penalties are based on annual revenue and frequency of lapses. The framework, effective from July 1, 2024, aims to safeguard retail investors' interests.

On Thursday, the Securities and Exchange Board of India (SEBI) introduced a stringent framework targeting 'financial disincentives' for stock exchanges and other market infrastructure institutions (MIIs) that fail to detect abnormal or suspicious trading activities. This move seeks to protect retail investors' interests through better market surveillance.

The financial penalties for surveillance-related lapses will be calculated based on the total annual revenue of an MII and the number of lapses within a financial year. The new regulations will take effect from July 1, 2024, according to SEBI's latest circular.

SEBI delineated that the principal aim of market surveillance by MIIs is to detect and deter manipulative trading, thereby preserving market integrity. The comprehensive framework will ensure the safety and transparency of the securities market amidst increasing trading volumes and retail participation.

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