The Securities and Exchange Board of India (SEBI) has issued a prohibition on Market Infrastructure Institutions (MIIs), including stock exchanges, depositories, and clearing corporations, from sharing real-time share price data with fantasy trading platforms.
This measure aims to curb the misuse of market information and protect investor interests.
SEBI’s circular, issued on May 24, 2024, outlines strict guidelines that MIIs must follow if they intend to share data with third parties.
Specifically, no real-time price data can be shared with online gaming platforms, apps, or websites that offer virtual trading services or fantasy games based on the movement of real-time share prices of listed companies.
MIIs are required to keep a vigilant watch over the activities for which real-time price data is being used by entities they share the data with.
The boards of these MIIs must review the list of entities and the nature of their activities at least once every fiscal year.
If data is shared for investor education and awareness purposes, it must be done with a lag of one day and without any monetary incentives.
This move by SEBI is intended to prevent financial loss for users who might otherwise be misled by the performance of virtual stock portfolios in gamified trading environments.
The introduction of these guidelines has significant implications for the fantasy stock trading industry.
Nithin Kamath, cofounder and CEO of Zerodha, noted that SEBI’s circular could potentially end platforms offering trading competitions, demo trading, and contracts for difference (CFDs).
These platforms, such as StockPe, TradingLeagues, and Bullspree, primarily allow users to practice trading in simulated markets and often involve real money competitions with monetary rewards.
StockPe, for example, targets students aged 18-24, providing them their first experience with stock market trading. The company earns commissions from users who invest in its tournaments.
Similarly, TradingLeagues, which raised $3.5 million in Pre-Series A funding led by Leo Capital, is also set to be impacted by the new regulations.
This precautionary measure is intended to protect users from financial harm and maintain the integrity of the securities market.
The new norms will come into effect on June 23, 2024, giving affected platforms time to adjust their business models and comply with SEBI’s regulations.
