Real-Time Stock Data Sharing With Fantasy Trading Apps Banned | NDTV Profit Explains

The Securities and Exchange Board of India issued new provisions in a circular prohibiting third-party online gaming platforms from using real-time share price data in their fantasy stock trading games.

The circular issued on May 27 directed market intermediaries such as stock exchanges, depositories, and clearing corporations to ensure that information on real-time share price data is not shared with a third-party entity unless it is to fulfil regulatory requirements or to ensure the orderly functioning of the securities market.

According to the notice, market intermediaries will have to enter into formal agreements with entities in accordance with SEBI's rules and regulations in order to share real-time price data. They will also have to provide relevant justification as to how sharing this data ensures the orderly functioning of the securities market, it said.

The Board of Market Intermediaries has been instructed to review the list of entities with whom real time data is being shared at least once in a financial year.

Intermediaries are also expected to ensure that the entities don't misuse third-party data and to have provisions for the same. However, they can disseminate share price data with a one-day delay for the purpose of educating and raising investor awareness.

Transaction fees on executed trades and subscription fees for accessing real-time share price data are the two main sources of revenue for exchanges.

SEBI has also explicitly prohibited creating and running any games or competitions on securities and security markets.

If a third-party platform acquires this real-time data and uses it to run games in exchange for a subscription fee, it will interfere with these exchanges' revenue stream and violate SEBI's rules and regulations.

Games typically utilize real-time data because they cannot function when players are aware of the stock prices in advance.

The data is only available for free to stock brokerage firms and members of the stock exchange; others have to pay high prices in order to access real-time price data.

SEBI had introduced a 'regulatory sandbox' in 2020, where it allowed the use of a live environment where financial tech companies can experiment with their ideas on a fixed number of customers, within a limited time frame.

"There is a way to execute these well with proper checks and balances to ensure retail investors’ interest is not compromised," Nitin Kamath, chief executive officer of Zerodha, a discount brokerage, wrote in an article. He shared his thoughts on viable ways for investors to use the regulatory sandbox.

"The starting point is to have an MVP, or minimum viable product,  and apply to the SEBI regulatory sandbox and get the regulatory nod for this by proving that this will help investors and the ecosystem," Kamath wrote.