Introduction
on 24.05.2024, the Securities Exchange Board of India (‘SEBI’) issued a circular[i] establishing guidelines/ norms for sharing real-time price data with third parties. SEBI observed that various online gaming platforms, apps, and websites offered virtual trading services or fantasy games based on the real-time share prices of listed companies. Some of these platforms even provide monetary incentives based on the performance of the virtual stock portfolio. SEBI observed that this data was being misused, and such unauthorized use raised significant concerns.
SEBI’s Guidelines on Sharing Real-Time Share Price Data
Based on the recommendations of the Secondary Market Advisory Committee of SEBI (SMAC), the SEBI laid down the following guidelines/ norms:
Restrictions on Sharing Real-Time Share Price Data: First, a blanket restriction has been imposed on all the stock exchanges, clearing corporations, depositories known as Market Infrastructure Institutions (‘MIIs’) and registered market intermediaries that they shall not share any real-time share price data with any of the third party including various platforms.
Secondly, real-time share price data can be shared only if it necessitates the orderly functioning of the securities market or for regulatory requirements.
Agreement: A proper agreement shall be put in place with entities with whom MIIs and market intermediaries intend to share real-time share price data, outlining the specific activities for which the real-time share price data will be utilized and justifying its necessity for maintaining the orderly operations of the securities market.
Due Diligence: The MIIs and market intermediaries must conduct due diligence while sharing such data and incorporate legal provisions in the agreement to prevent any data misuse. Additionally, the MIIs and market intermediaries must take necessary measures to prevent price data misuse by the entities with whom it is shared.
The list of the entities and activities for which real-time share price data is shared will be reviewed by the boards of MIIs and market intermediaries once in a financial year.
Data Sharing for Educational Purpose: The market price data can be shared for education and awareness activities amongst the investors without offering monetary incentives with a one-day delay.
Applicability: These guidelines/ norms are applicable to all MIIs and registered market intermediaries. The MIIs and registered market intermediaries must take the necessary steps to implement these norms, ensuring compliance with SEBI’s guidelines. They must also amend relevant bylaws, rules and regulations and circulate them on their website.
Conclusion
The SEBI's guidelines/ norms curb the malpractices of gaming apps and platforms which provide virtual trading services based on real-time share prices of listed companies. It underscores its commitment to maintaining market integrity by limiting the sharing of real-time share price data and emphasising due diligence; SEBI aims to prevent the risks associated with the unauthorized use of price data. This move aligns with the regulatory efforts to ensure responsible data-sharing practices, fostering trust and stability in worldwide financial markets.
It is noteworthy that the MIIs and market intermediaries violating regulations laid down or not following the guidelines may attract penal actions or consequences under the provisions of SEBI.
End Note
[i] The Securities Exchange Board of India, Circular - SEBI/HO/MRD/MRD-PoD-3/P/CIR/2024/56 (24.05.2024).
Authored by Purvi Garg, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinion.
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