The Securities and Exchange Board of India (SEBI) has taken decisive action against the misuse of market data by prohibiting market infrastructure institutions (MIIs), including stock exchanges, depositories, and clearing corporations, from sharing real-time share price data with fantasy trading platforms that gamify stock trading.
New Regulations to Curb Data Misuse
In a circular issued on May 24, SEBI outlined new norms aimed at preventing the misuse of the market’s information. The guidelines specify that no real-time price data will be shared with any online gaming platforms, apps, or websites that offer virtual trading services or fantasy games based on real-time share prices of listed companies. Key points of the guidelines include:
- Restrictions on Data Sharing: Real-time price data cannot be shared with platforms providing trading competitions, demo trading, or similar services.
- Vigilance and Monitoring: MIIs must monitor the activities of entities using their data, ensuring it is not misused. The list of entities and activities must be reviewed annually by the Board of the MIIs.
- Educational Use: Data shared for investor education and awareness must be lagged by a day, and no monetary incentives should be involved.
Impact on Fantasy Stock Trading Platforms
These new regulations are expected to significantly impact fantasy trading platforms such as StockPe, TradingLeagues, and Bullspree, which allow users to practice trading in simulated markets and compete in tournaments for monetary rewards.
For example, StockPe targets students aged 18-24, offering them an introduction to stock market trading and earning commissions from users participating in these tournaments. Similarly, TradingLeagues recently raised $3.5 million in a Pre-Series A funding round led by Leo Capital, demonstrating the growing interest and investment in such platforms.
Industry Reactions and Concerns
Zerodha co-founder and CEO Nithin Kamath commented on the new guidelines, noting that they effectively put an end to platforms offering trading competitions and other related services. “SEBI’s circular essentially means that it ends all platforms offering trading competition, demo trading, CFDs, and more,” Kamath stated in a post on X (formerly Twitter).
Protecting Investors’ Interests
SEBI introduced these norms to protect investors’ interests in securities, as discussed during its Secondary Market Advisory Committee (SMAC) meeting. The regulations are set to come into effect on June 23, 2024.
While the educational aspect of these platforms is acknowledged, SEBI expressed concerns about the financial risks users face. An official explained, “If the data is used for education or fun purposes it’s fine, but monetary incentives can’t be allowed based on the performance of the virtual stock portfolio. Then it’s like dabba trading, which is illegal. This is a precautionary measure as it’s a niche segment.”
