SEBI Bans Exchanges From Sharing Data With Fantasy Stock Market Apps

Capital markets regulator Securities and Exchange Board of India (SEBI) has prohibited 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. 

In its circular issued on May 24, the SEBI said that the norms have been passed to curb the misuse of the market’s information. If an intermediary is looking to share data with a third party, it will have to adhere to the following guidelines, among others: 

No real time price data will be shared with any online gaming platforms,  apps, websites, that provide virtual trading services or fantasy games which are based on movement of real time share prices of listed companies. 

• Moving forward, MIIs have to keep a vigil on the activities for which the real time price data is being used by entities with whom they intend to share the data.
• The list of entities and activities  for  which  the  real-time  data  is  being  shared shall  be reviewed by the Board of the MIIs at least once in a fiscal year.
• If the data is being shared with entities for the purpose of investor education and awareness, no monetary incentive shall be involved. The data can be shared with a lag of a day. 

Zerodha cofounder and CEO Nithin Kamath said these guidelines will potentially end the fantasy stock trading industry. 

“Sebi’s circular essentially means that it ends all platforms offering trading competition, demo trading, CFDs, and more,” he said in a post on X. 

The regulator said the norms are needed to protect the interests of investors in securities during its Secondary Market Advisory Committee (SMAC). The norms will come into effect on June 23, 2024. 

Platforms that will see potential impact from the circular include StockPe, TradingLeagues and Bullspree, among others. These platforms primarily allow users to practise trading in simulated markets. Users can also use real money to compete against peers in tournaments and earn monetary rewards.

StockPe, for instance, targets students aged 18-24, giving them their first taste of trading in stock markets. The company gets a commission from each user investing in these tournaments.

On the other hand, this comes in about a year after gamified stock trading platform TradingLeagues raised $3.5 Mn as part of its Pre-Series A funding round led by Leo Capital.

While the regulator doesn’t have qualms with the educational push that these platforms can have, it took notice of the financial loss that users can have from this. 

“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,” an official was quoted as saying by ET.