As of May 24, a circular was issued by SEBI prohibiting stock exchanges and intermediaries in India from sharing time-sensitive share price information with fantasy trading platforms that gamify stock trading in real-time.
In the week after the Securities and Exchange Board of India (SEBI) announced that such services should cease operation for the time being, nearly half a dozen startups focused on stock gaming have either shut up shop, paused operations, or are considering pivotal moves. It is becoming increasingly difficult for companies that use dated data to retain young customers, to continue to appeal to them as the appeal of leisure or educational live gaming and simulations is fading.
As part of the latest wave of startups to feel the heat, Trinkerr, founded and backed by Accel and Kunal Shah, has paused the development of its gaming product to contemplate its next move. An app for fantasy stocks backed by Dream Sports - Investro - has been discontinued and withdrawal requests are being accepted for it. Market regulators have ordered stock exchanges, clearing companies, and depositories to review the fees they charge members such as stock brokers and depository participants to ensure that they remain competitive.
A market infrastructure institution (MII) refers to a market institution such as an exchange, clearing corporation, or depository. Brokers bear the cost of providing these services to investors, and they are recouped by investors as service charges. There have currently been several issues related to Trinkerr, such as the fact that the app has never been a pure-play gaming app (without rewards or incentives), but rather focuses on educational aspects and that the data is being delayed by five minutes. Due to the mandate that was placed upon exchanges and intermediaries, the product has become ineffective as a result of these changes.
There is no doubt that delayed data, especially with the variability of expiration dates in F&O trading, can lead to confusion and be detrimental to the educational experience for our users if they introduce inaccuracies into the market conditions that are being studied by them. Investor and Trinkerr are not the only firms facing distress as regulations change as a result of several factors. SEBI's new norms apply to exchanges and market intermediaries, such as brokerages, on June 24, the first day they went into effect.
These norms prohibit exchanges and market intermediaries from sharing "live" data with third-party platforms offering virtual trading, thrilling fantasy games, or educational courses. It was announced on May 22 that "investor education and awareness activities (which do not involve monetary incentives for users) can be supported by delayed data feeds (with a 1-day lag)," said the Financial Services Authority in a circular. This move by SEBI to crack down on virtual trading and stock gaming apps comes at the same time as retail investors become more interested in futures and options (F&Os), as well as with concerns about a parallel market that lies outside of its jurisdiction.
There has been a heated discussion among investors regarding social trading apps, with some arguing that they should be viewed as skill-based games, according to Sanjam Arora, Partner at Trilegal. "SEBI is concerned that users of the above applications will not be provided with the same level of protections as investors typically receive in the market for securities daily.". Several concerns have been raised about the possibility that gamifying the trading experience could encourage high-risk behaviours among users that may lead to more dangerous behaviour in the real world, as well,” she stated.