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SEBI now allows individuals to participate in regulatory sandbox for capital markets


The Securities and Exchange Board of India (SEBI) has revised the framework for its innovation sandbox allowing individuals, in addition to fintech companies  to participate. Under the sandbox, the markets regulator will give participants access to market data to recommend or build new products and technology solutions for India’s capital market.

The first main difference between the revised framework and the earlier framework, which came out in May 2019, is that SEBI has expanded the eligibility criteria to individuals. Secondly, it has created a graded entry criteria and has made existing market organisations responsible for on-boarding the participants. Third, while the previous framework says that participants in the sandbox can seek protection on their intellectual property rights under the sandbox, the revised framework says that participants cannot seek to enforce their IPR since there could be multiple applications with similar ideas

SEBI said that fintechs can develop improvements in the securities market system to bring about more efficiency, fairness and transparency. “To create an ecosystem which promotes innovation in the securities market, SEBI is of the opinion that fintech firms should have access to market related data which is otherwise not readily available to them, as well as to a test environment to enable them to test their innovations effectively before the introduction of such innovations in a live environment,” it said.

Eligibility criteria

  • Any citizen or registered entity can apply to be part of Stage-1 of the sandbox, provided they have complied with Know-Your-Customer norms
  • The applicant needs to demonstrate a need to test a specific solution and therefore, gain access the test data and test environment
  • For entering Stage-2 of the sandbox, the applicant needs to complete 60-days in Stage-1 and demonstrate that their innovation has achieved adequate progress
  • Applicants would then need to make a presentation before the steering committee for evaluation before entry to Stage-2 of the sandbox

Operations of the sandbox

  • Enabling organisations, like stock exchanges, depositories, brokerages and other market actors, will be responsible for on-boarding the sandbox participants
  • During Stage-1, participants will get access to limited data related to depositories (KYC data), stock exchanges (trade and order logs) and RTA data (mutual fund transactions)
  • The datasets will be historical, anonymised and related to episodic market events.
  • The sandbox will not test solutions based on live data
  • Enabling organsiations will need to make sure that the solutions being tested under sandbox  directly takes place on their environment
  • These organisations will need to provide the participants access to the sandbox through application program interfaces (APIs)
  • Once the participants graduate to Stage-2, the restrictions on data access and resources like processing power, memory or, storage will be removed

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