Talking about technological advancements, the Sebi chief said funds and securities can now flow across the world in few microseconds.
"This enables setting up of complex global structures which could be potentially misused for tax avoidance, money laundering, round tripping, etc," he said.
Describing technology as a game changer in financial services and a catalyst in improving ease of doing business, Tyagi emphasised that the Indian securities market has always been at the forefront in embracing technological advancement keeping pace with the developed securities market in the world.
Tyagi's remarks, made during a panel discussion in Singapore on technology in financial services this week, has been mentioned in a release issued by the regulator on Tuesday.
The Sebi chairman also said the Indian securities market has always been at the forefront in embracing technological advancement keeping pace with the developed securities market in the world.
He said that "Sebi not only encourages technological innovation in securities markets, it also uses and regularly updates technology in its own functioning and plans to spend INR 5 billion (Rs 500 crore) on IT projects in the next 5 years."
Besides, the regulator has also planned a data lake project to augment analytical capability at Sebi with advance analytical tools such as artificial intelligence and machine learning, deep learning, big data analytics, pattern recognition, processing of structured and unstructured data, text mining and natural language processing, among others.
Citing examples, he said that emerging technologies like artificial intelligence and machine learning are being used in the Indian capital markets in areas like robo advisory services, surveillance through social media analytics and IT security apart from other areas.
On challenges, Tyagi said there are broader challenges, including compliance requirements.
"Globally, many data localisation and data privacy laws such as GDPR have come into force. In India too, Personal Data Protection Bill is being introduced in the Parliament," he added.
The markets watchdog plans to have its own private cloud to have a common IT infrastructure which is readily scalable as well as has systems with open standards compatible with any technology.
"A Network Operations Centre for continuous monitoring of the smooth functioning of the Sebi IT network and Securities Operations Centre to detect and mitigate cyber-attacks on Sebi's IT infrastructure in efficient and effective way, are under implementation, and are expected to be in place by the end of this year," he said.
He also mentioned initiatives such as setting up of integrated surveillance system, online complaint redress system of Sebi (SCORES), KYC registration agencies, dematerialisation of securities, T+2 rolling settlement, and the introduction of inter-operability of clearing corporations.
Enumerating some of the steps taken by Sebi to encourage and facilitate financial technology in securities markets, Tyagi said the regulator has set up a committee on financial and regulatory technologies to advise it on ways to reap the opportunities provided by financial technology.
Sebi has also enabled an innovation sandbox to facilitate development and adoption of innovative financial technology solutions in the securities market by entities not regulated by the regulator, he added.
The panel discussion was part of the fourth South Asian Diaspora Convention organised by the Institute of South Asian Studies at the National University of Singapore. SRS HRS