The Securities and Exchange Board of India (SEBI) has issued a new circular dated May 24, 2024, outlining stringent norms for sharing real-time price data with third parties. These regulations aim to curb the misuse of such data, especially by online platforms offering virtual trading services and fantasy games based on stock market movements. This article provides a detailed overview of the new guidelines and their implications for market participants.
Introduction: SEBI, the regulatory authority for securities markets in India, has observed a growing trend of online platforms utilizing real-time share prices of listed companies for virtual trading and fantasy gaming. Such activities, while innovative, pose significant risks of data misuse and unauthorized incentives. To address these concerns, SEBI’s Secondary Market Advisory Committee (SMAC) deliberated on the issue, resulting in the formulation of comprehensive norms for sharing real-time price data.
Detailed Analysis
1. Observations and Concerns: SEBI noted that several online gaming platforms and websites are engaging users with virtual trading activities, often incentivizing participants with monetary rewards. This practice raises concerns about the unauthorized use and potential manipulation of real-time price data, which could affect market integrity.
2. Norms for Data Sharing: SEBI has mandated that Market Infrastructure Institutions (MIIs) and registered market intermediaries adhere to strict guidelines when sharing real-time price data:
- Restricted Sharing: Real-time price data should not be shared with any third parties, including online platforms, unless it is essential for the orderly functioning of the securities market or fulfilling regulatory requirements.
- Agreement Requirement: MIIs and intermediaries must enter into detailed agreements with entities receiving the data. These agreements should specify the purpose of data usage and ensure it aligns with maintaining market order.
- Annual Review: The Board of MIIs or market intermediaries must review the list of entities and their data usage activities annually.
- Lagged Data for Education: Market price data can be shared for investor education and awareness activities with a one-day delay and without offering monetary incentives.
- Due Diligence: MIIs and intermediaries must perform due diligence to prevent data misuse and ensure compliance through robust legal agreements.
3. Implementation Timeline: The provisions of this circular are effective from the 30th day of its issuance, allowing stakeholders a brief period to align their practices with the new norms.
4. Responsibilities of MIIs: MIIs are required to take several actions to comply with SEBI’s directive:
- Implement necessary systems and processes.
- Amend relevant bye-laws, rules, and regulations.
- Inform market participants and disseminate the circular’s provisions on their websites.
Conclusion: SEBI’s new norms for sharing real-time price data represent a significant step towards ensuring the integrity and orderly functioning of the securities market. By restricting data sharing and imposing stringent compliance measures, SEBI aims to protect investors and uphold market stability. MIIs, clearing corporations, depositories, and market intermediaries must adapt swiftly to these regulations to prevent data misuse and foster a secure trading environment.
For more detailed information, stakeholders are encouraged to refer to the official circular available on the SEBI website.
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Securities and Exchange Board of India
Circular No. SEBI/HO/MRD/MRD-PoD-3/P/CIR/2024/56 Dated: May 24, 2024
To
All Recognized Stock Exchanges
All Recognized Clearing Corporations
All Depositories
All Registered Market Intermediaries
Sir/Madam,
Subject: Norms for sharing of real time price data to third parties
1. It has been observed that certain online gaming platforms, apps, websites, etc. (hereafter referred to as “platforms”) are providing virtual trading services or fantasy games which are based on movement of real time share prices (price data) of listed companies. Some platforms are even offering monetary incentives based on the performance of the virtual stock portfolio.
2. The issue of sharing of real time price data with third parties including various platforms was deliberated in Secondary Market Advisory Committee of SEBI (SMAC). Based on the recommendations of SMAC and to curb misuse or unauthorized use of such data, it has been decided that sharing of real time price data with third parties shall be subject to the following:
i. Stock exchanges, clearing corporations and depositories (collectively referred as Market Infrastructure Institutions (MIIs)) and registered market intermediaries shall ensure that no real time price data is shared with any third party including various platforms, except where sharing of such information is required for orderly functioning of the securities market or for fulfilling regulatory requirements.
ii. MIIs or market intermediaries shall enter into appropriate agreement with entities with whom they intend to share real time price data. The said agreement shall provide for activities for which the real time price data would be used by the entity including the justification that it is required for orderly functioning of the securities market. The list of entities and activities for which the real-time data is being shared with shall be reviewed by the Board of the MIIs or market intermediaries at least once in a financial year.
iii. Market price data may be shared for investor education and awareness activities without offering any kind of monetary incentive to the participants, with a lag of 1 day.
iv. MIIs and market intermediaries shall ensure due diligence while sharing such data. The legal agreement for sharing the data shall have provisions to prevent any kind of misuse of the same by the entities.
v. The MIIs and the market intermediaries shall on best effort basis take necessary steps to avoid misuse of price data by entities with whom the data is being shared.
3. The provisions of the circular shall be applicable from the 30th day of issuance of the circular.
4. All MIIs are advised to:
i. take necessary steps and put in place necessary systems for implementation of the above.
ii. make necessary amendments to the relevant bye-laws, rules and regulations, wherever required, for the implementation of the above; and.
iii. bring the provisions of this circular to the notice of the market participants (including investors) and disseminate the same on their website.
5. This circular is issued in exercise of the powers conferred under section 11(1) of the Securities and Exchange Board of India Act 1992 read with regulation 51 of the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018, section 26(3) of the Depositories Act, 1996 and regulation 97 of Securities and Exchange Board of India (Depositories and Participants) Regulations, 2018 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.
6. This circular is available on SEBI website at sebi.gov.in at “Legal Framework – Circulars.”
Yours faithfully,
Hruda Ranjan Sahoo
Deputy General Manager
Tel no.: 022-26449586
Email: hrsahoo@sebi.gov.in
