Tech used by casinos in Las Vegas may help Sebi tackle insider trading

Not just India, but several global financial regulators are considering such AI programmes to nail securities law violators such as insider trading

The artificial intelligence (AI) systems that helped Las Vegas casinos to keep away tricky gamblers may soon come to help Securities and Exchange Board of India (Sebi) in its crackdown on insider trading, a media report said on Tuesday.

According to the Economic Times report, Sebi is in talks with a top US-based AI provider to purchase such a system.

"The company has given a live demonstration to Sebi a few weeks ago as to how the software will work and about the customisations possible on the platform," the ET quoted a person in the know.  If the deal goes through, the firm will customise the software as per Sebi requirements.

The casino AIs come with superior risk management systems compared to the traditional data analytics that regulators use, because the margin of error for these AIs is very thin, the ET report said, adding the failure to detect even one rogue gambler could cost a casino in seven figures.

Not just India, but several global financial regulators are considering such AI programmes to nail securities law violators.

In the past few years, Sebi has been investing in a major way to upgrade its technology to boost its capability for market surveillance, investigations, and policymaking.

Until recently, the market regulator mostly relied on tips and information to investigate white-collar crimes, but they have been found wanting to build water-tight cases against insider-trading violations.

In its annual report for 2020-21, Sebi said it will be implementing major information technology projects, which are critical to its day-to-day operations and its mandate.

‘High-risk’ traders could come under Sebi’s scrutiny if the casino AI platform is implemented. In the case of casinos, high-risk clients are the ones who are over leveraged, or have a trend of placing erratic bets.