SEBI Regulates Sharing Of Real-Time Price Data To Protect Investors

On May 24, 2024, the Securities and Exchange Board of India (“SEBI”) issued a circular to clarify the norms for sharing real-time price data with third parties.[1] This circular aims to curb the potential misuse of such data and ensure investor protection. This comes in response to the growing popularity of online gaming platforms offering virtual trading services or fantasy games based on real-time stock prices.

Explanation

SEBI’s primary concern is to prevent the misuse of real-time price data, which is crucial for informed investment decisions. Sharing this data with unregulated platforms could lead to market manipulation, where malicious actors exploit the information to manipulate stock prices for personal gain, and could also result in misinformation and scams, where platforms provide misleading information or encourage risky investment behaviour through gamification.

Key Points

• Restrictions on Sharing: Market Infrastructure Institutions (“MIIs”) and intermediaries can only share real-time data for legitimate purposes like market functioning or regulatory compliance.
• Curbing Gamification Incentives: The ban on monetary rewards in fantasy stock games might dampen their appeal. However, it prevents users from potentially making risky decisions based on short-term gains in a gamified environment.
• Agreements and Due Diligence: Sharing requires formal agreements outlining the purpose and safeguards against misuse.
• Focus on Investor Protection: SEBI aims to prevent misuse of real-time data that could lead to market manipulation, misinformation, or risky investment behaviour by users of online platforms.
• Alternative Educational Tools: SEBI’s allowance for data sharing with a one-day lag opens doors for educational platforms to develop simulations based on historical data. This could be a valuable tool for new investors to learn about market trends and investment strategies without the risks associated with real-time data.
• Balancing Innovation: The regulations attempt to strike a balance between fostering innovation in financial education tools and protecting investors.

SEBI’s regulations aim to strike a balance between fostering innovation and protecting investors. Thus, virtual trading platforms can introduce potential investors to the stock market in a simulated environment. This could increase financial literacy and participation.

Conclusion

SEBI’s regulations balance fostering innovation with protecting investors. Although this circular might initially limit some gamified learning platforms, it encourages the creation of high-quality educational tools using historical data. Moving forward, collaboration between SEBI, financial educators, and tech companies will be crucial to developing a framework that protects investors while enabling the financial education sector to grow with responsible and engaging tools.

[1] https://www.google.com/url?q=https://www.sebi.gov.in/legal/circulars/may-2024/norms-for-sharing-of-real-time-price-data-to-third-parties_83572.html&source=gmail&ust=1719071024226000&usg=AOvVaw1C45a5PUR1npgbeNMAhJhW