The Securities and Exchange Board of India (SEBI) is taking action against gaming apps that offer virtual trading services and fantasy games based on real-time stock prices. These apps have become popular due to the high interest in stock trading among retail investors.
SEBI’s New Rules
SEBI has instructed stock exchanges and depositories to stop sharing real-time price data with third parties. This move aims to prevent these gaming activities.
“It’s okay if the data is used for educational or entertainment purposes, but monetary incentives based on virtual stock portfolios are not allowed,” said a SEBI official. “This is similar to dabba trading, which is illegal.”
Media agencies providing real-time data feeds will not be affected by this new rule.
Precautionary Measures
Many online stock gaming platforms have launched in India recently. These platforms don’t involve real-time trading through stock brokers. Instead, users compete using fictional trading strategies and portfolios, often paying a membership fee to join. The best performers win prizes.
“This is a precautionary measure as it’s a niche segment,” said a member of SEBI’s expert committee on the secondary market.
In some developed countries, gaming based on real-time stock data is allowed because exchanges earn significant revenue from selling data. However, SEBI rules prohibit offering any games or leagues related to the securities market.
Unauthorized Data Use
“If you’re engaging in wager contracts, it’s not allowed. This is unauthorized data usage,” said the SEBI official. “Exchanges and depositories must now monitor how their data is being used.”
Raj Kundra Case
A few years ago, SEBI investigated a case involving businessman Raj Kundra, whose firm used data feeds for gaming activities.
“This new SEBI rule essentially ends all platforms offering trading competitions, demo trading, and CFDs (contracts for difference),” said Nithin Kamath, co-founder of Zerodha, on X.
Exchanges have previously warned against using data scraped from their websites or brokers’ websites. Despite these warnings, some gaming platforms have continued to find ways around the rules.
Exchanges make money from transactions and selling data feeds. Stock brokers get these feeds for free to provide data to their clients. When exchanges sell live data feeds to non-broker entities, they charge fees.
No Monetary Incentives
SEBI has stated that market price data can be shared for investor education and awareness activities, but without any monetary incentives and with a one-day delay. Stock exchanges must also conduct due diligence when sharing data.
Some entities may be reselling live data to gaming app developers. Stock exchanges will need to update their legal agreements to prevent misuse of data.
By taking these steps, SEBI aims to curb the unauthorized use of real-time stock data in gaming apps.
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