Sebi sharpens tech tools to combat pump-and-dump market frauds

As market manipulation grows more sophisticated with the rise of technology, India’s markets regulator is arming itself with equally advanced tools.

The Securities and Exchange Board of India (Sebi) is moving from reactive monitoring to predictive oversight—deploying data analytics and algorithmic surveillance to detect “pump and dump” schemes before they spiral.

At the Capital Market Confluence in Mumbai on Saturday, Sebi chairperson Tuhin Kanta Pandey said the regulator’s enhanced oversight leverages algorithmic monitoring systems designed to pinpoint abnormal price spikes and volumes, enabling early intervention.

“We have revamped our data warehouse system to develop new rule-based alerts to identify ‘pump and dump’ patterns and to detect fraudulent trades in bulk deals,” Pandey said in his keynote, underscoring that swift surveillance and regulatory agility are key to maintaining investor confidence.

Pandey noted that Sebi’s surveillance now proactively tracks patterns observed in earlier enforcement actions.

“If you could have seen some of Sebi’s orders on pump and dump, then you would have realized that they actually follow certain patterns. Now our surveillance system is proactively following and monitoring,” he said during a conversation on the sidelines.

Safeguarding retail trust

The urgency is clear as retail investors remain vulnerable when markets are turbulent.

“On any given day, our security market infrastructure handles a staggering volume of activity. In the last financial year, our stock exchanges handled over 1600 crore messages daily, with a peak of over 2900 crore messages. Behind these numbers is the trust of crores of investors. This is the trust we must always protect,” Pandey said.

The anti-fraud push extends to the digital app ecosystem. To combat fraudulent apps imitating registered brokers, Sebi whole-time member Kamlesh Chandra Varshney revealed at the same event that the regulator has asked Google to incorporate verification tick marks for genuine broking apps on Play Store—an initiative expected to go live within two months.

“When you open the app store, the apps of the registered stock brokers will have a tick mark which will once again help investors to know which is the right app and which one is fake,” Varshney said, highlighting the push for investor awareness through efforts like the valid UPI initiative and the ‘Sebi vs Scam’ campaign.

Next frontier: algo trading

Varshney also pointed to attempts to revive the commodity market, noting, “The immediate challenge is algo trading—how to make it operational. We have to cross that bridge as well because algo trading is going to be the future. We have given a timeline till December, and hopefully we will sort out everything by then”.

Meanwhile Pandey warned that the future of market resilience is digital resilience. With algorithmic and high-frequency trades under sharper scrutiny, Sebi continues to update its regulatory framework.

“An institution proves its resilience by innovating across the spectrum to create products and services that will genuinely deepen our markets. It prioritizes the long-term financial well-being of its clients, understanding that client trust is the true source of resilience,” Pandey concluded.