Mumbai: The Securities and Exchange Board of India (Sebi) is revamping its surveillance systems as insider trading gets more sophisticated. Earlier, company insiders or their proxies would buy and sell shares based on insider tips. But now they have started using complex derivative strategies to make a quick buck — and evade the law. This has prompted the market regulator to develop an in-house system to scan all derivative trades and red flag suspicious transactions. People with direct knowledge of the matter told ET that the new system scans about 20 million trades every day.Insider trading is a market crime in which company insiders with knowledge of unpublished price sensitive information (UPSI) use it to make money.Sebi didn’t respond to ET’s mailed query.“You can directly ascertain the intent of purchase or sale by an insider or his proxies but with derivatives it is really difficult to do the same,” said a senior regulatory official. “The new platform scans and analyses such complex trading data and tallies them with various other information, including the IP address from which the trade was made,”The official cited above said the platform scans derivative trading in listed companies based on ‘overall delta positions’. To put it in simpler words, the platform tries to detect large unhedged positions taken by individuals in each stock and analyses them. It is counter intuitive for a normal trader to take such large unhedged positions unless he is in possession of some tip about the company. It also collates input from other data sources. Alerts generated by the new platform are “significantly more sophisticated than the existing insider trading alerts, and they have given a boost to Sebi’s surveillance in the complex equity derivatives market consisting of futures and options contracts,” said Sebi’s annual report for FY21 released earlier this month.The functionality of the platform doesn’t end there. It also creates a database of suspected transactions along with traders who have undertaken the transaction.“This feature will help Sebi establish patterns. If some trader frequently indulges in such transactions, the system will capture those and alert us,” the official cited above said. “We then dig out more details and see if the trader is connected to any of the insiders.”Insider trading is harder to detect than other market violations. For instance, disclosure lapses by companies can be easily ascertained by the time when a stock market announcement was made, which is automatically captured in the system. Similarly, unauthorised movement of shares from one account to another can be caught through depository systems.But insider trading is not that easy to detect. Nefarious company insiders use unrelated proxies to make the trades. Hence, Sebi needs to establish a connection between the one who had inside information and the one who traded based on the information. This is one of the key reasons why insider trading cases have been very hard to establish in courts.During FY21, Sebi received 210 complaints of insider trading, against 185 in FY20. Also, 30 new cases were taken up for investigation during FY21 against 49 in FY20. This fall in insider trading cases is in line with the overall fall in the number of cases taken up by Sebi in FY21 — to 94 from 161 in FY20, official data showed.