The Securities and Exchange Board of India (SEBI) has recently established norms for sharing real-time share price data of listed companies with third parties, including various platforms, to curb misuse of this information.
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This move aims to regulate the use of this data, particularly by online platforms offering:
Fantasy Games: These games allow users to create virtual portfolios and compete based on the performance of real-time stock prices. Sometimes, entry fees and cash prizes are involved.
Virtual Trading Platforms: These platforms simulate stock trading using real-time prices but without the actual investment of money.
SEBI’s main concerns are:
Potential Misuse of Data: This came after SEBI observed that certain online gaming platforms, apps, websites, etc. are providing virtual trading services or fantasy games which are based on the movement of real-time share prices (price data) of listed companies.
Some platforms are even offering monetary incentives based on the performance of the virtual stock portfolio, SEBI noted.
To prevent misuse or unauthorised use of real-time price data, certain rules apply, SEBI said in a circular.
Uninformed Investors: Games and virtual trading platforms might encourage participation from people unfamiliar with the risks of real stock market investing.
The new guidelines require:
These rules include Market Infrastructure Institutions (MIIs) including stock exchanges and registered market intermediaries must ensure that real-time price data is not shared with any third party unless necessary for the proper functioning of the securities market or regulatory compliance, the regulator said.
MIIs or intermediaries must have agreements with any entity they share real-time price data. These agreements must specify the activities and reasons for using the data, ensuring it supports the securities market’s orderly functioning. The list of entities and activities must be reviewed by the board of MIIs or intermediaries at least once a year.
Data Delays for Educational Purposes: Sharing real-time data for investor education purposes is permitted, but the data must be delayed by at least one day to avoid influencing real-time trading decisions.
MIIs and intermediaries must conduct due diligence when sharing data and include provisions in agreements to prevent misuse. Also, MIIs and intermediaries should take all possible steps to prevent misuse of price data by the entities they share it with.
These rules will take effect 30 days after the issuance of this circular, SEBI said.
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