"There is huge technology change in the entire market. It has never been done anywhere in the world ever...and we did it in India. So, today in terms of margin protection - the protection of client's securities - there is nobody better in the world than India," Buch said in her lecture on 'Data and Technology in the Capital Market'.
The event was organised by the Indian Institute of Management-Bangalore to mark its 49th Foundation Day celebrations on Friday.
Explaining how data is used for surveillance to check malpractices during trading, the SEBI chairperson said the study of algorithm and alerts make it easy to study the trading pattern of people and understand that this is 'insider trading'.
SEBI has also embedded a QR code which, Buch said, was quite radical. When it is scanned, one can see a video clip, which showed the 'Delta' positions of the particular individual whose trading pattern is reflected.
"You look at that film, and you say, 'this is insider trading. This cannot be anything else'. So, we use data in our surveillance," the SEBI chief explained.
The regulatory body is also using technology to check 'front running' in the mutual fund market.
She, however, said SEBI too had some setbacks because the regulation has not kept pace with technology but it is trying to fix the problem in the next few months.
The SEBI chief said the board is now using 'Suptech' or Supervisory Technology as well to inspect and make sure that everybody's following the rules.
Citing an example from the mutual fund industry, she said SEBI started collecting data from all the 44 mutual fund houses operating in the country.
As the data started coming in, SEBI told the industry that they are going to develop 80 algorithms and explained to them the logic and the interpretation of SEBI laws in the light of the algorithm emanating from the data.
According to Buch, many of her colleagues were quite upset as they were against revealing the algorithm and questioned the objective behind it. Buch, however, said she gave an explanation that satisfied them.
"The objective of the regulator is not to catch people doing bad things but to prevent them from doing bad things. So, we declared that we are now going to make this 80 algos," she explained.
Today, SEBI conducts inspections every quarter, which otherwise could be done on a daily basis, because the board wanted to give the industry time to find their own mistakes and fix them instead of showing up every day, Buch said.
"Now, this is only the beginning because this is the easy stuff. So, what's the tough stuff? The tough stuff is where you have to try and find violations of the spirit of the law, and not the letter of the law," the SEBI chief said.
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