Tech is key, but people are the strongest defence against cyber frauds in financial markets: Sebi Chairman

Economic Times

3 days ago

Sebi chief highlights that people, not just technology, are key to defending financial markets from cyber threats, urging constant skill upgrades and proactive risk management.
Sebi Chairman Tuhin Kanta Pandey stressed that while technology is vital in preventing cyber frauds, human expertise remains the strongest defence, urging continuous learning, vigilance, and robust systems to protect India's financial market infrastructure.
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Securities and Exchange Board of India (Sebi) Chairman Tuhin Kanta Pandey on Thursday said that people are the real custodians of financial markets notwithstanding that technology is essential to prevent cyber frauds."Technology is essential, but people remain the most critical defence. Various studies show that a large number of breaches happen because of human mistakes such as negligence by professionals defending the system, users falling victim to phishing attacks and unintended disclosure of critical information," Pandey said, at a cybersecurity training program for Sebi Regulated Entities at NISM."Your role as IT professionals in the securities market goes beyond code, configurations and dashboards. You are guardians of systemic stability. Technology may provide the tools, but it is human expertise that decides how effectively those tools are used. Capacity building, therefore, is not a one-off event or a box to be ticked. It is a continuous process of learning, upgrading, and adapting - because the threat landscape never stands still. Threats evolve; so must we," he added.The Sebi chief said that exchanges, clearing corporations, depositories are not just market utilities, they are infrastructure of national importance and their smooth functioning ensures capital formation, investor confidence, and economic resilience.They operate in a dynamic technological environment where the threat landscape evolves daily.Also Read: Zerodha's Nithin Kamath on how a boring, invisible Sebi step brought windfall gains for retail investors He emphasised how important it was to stay ahead of the curve in this fast- evolving landscape and it is not a choice but a survival imperative. He said that prevention costs far less than the cure.Pandey cited an example of the NASDAQ data breach in 2010, where hackers gained access to NASDAQ's Directors Desk — a system used by corporate boards to share confidential documents. "No trades were altered, but the breach shook confidence deeply. It was a wake-up call. Even without immediate financial loss, the perception of vulnerability can ripple through the market," he added.The Sebi chairman also brought home the point to strengthen the trading algorithms given a glitch could trigger market disruptions in milliseconds."A misconfigured server can open doors to malicious actors. A compromised account can lead to data leaks with severe reputational and financial damage. Sometimes, the biggest market shocks may not come from a hacker's keyboard but from within our own systems. Internal errors, overlooked processes, or rushed deployments can be just as destructive as an external attack," he said.In this regard, he cited the example of Knight Capital. In 2012, this major U.S. market maker rolled out new trading software — but failed to completely remove some obsolete code from earlier systems. Pandey said that within just 45 minutes, the "rogue code" began firing-off faulty trades worthbillions and the fallout was a staggering $440 million in losses leading to the company's collapse within weeks.