9. Challenges in Regulation of Capital Market

In the next four to five years, the direction of the capital markets will primarily depend on:

♤ Structural changes, including consolidation, to existing capital markets participants’

business models.

♤ Non-traditional players challenging the status quo.

♤ Innovations including extensive use of big data, artificial intelligence (AI) and machine learning. Participants will seek to reduce cost and create competitive advantages.

♤ Straight through processing and use of distributed ledger and blockchain technology.

♤ Pools of capital increasingly looking to reach out directly to consumers of capital, thereby lowering costs and increasing overall liquidity. Crowd sourcing and peer to peer opportunities, real estate investment trusts and infrastructure investment trusts gaining momentum.

♤ Investment management seeing impetus through robo advice, smart contracts and electronic trading.

♤ Successful resolution of applications filed under the Insolvency and Bankruptcy Code (IBC).

♤ Cost pressures and innovation compelling market participants to maximize outsourcing arrangements. Regulators will have to deal with the attendant risks, especially of cross- border outsourcing.

An inter-regulatory working group set up by the Reserve Bank of India has recommended that an appropriate framework be introduced for “regulatory sandbox/innovation hub" within a well-defined space and duration where financial sector regulators will provide the requisite regulatory support, so as to increase efficiency, manage risks and create new opportunities for consumers in the Indian context similar to other regulatory jurisdictions.