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SEBI bans real time virtual trading apps over concerns of investor risk and ‘Dabba Trading’ practices

SEBI is banning virtual stock trading apps offering real-time data and financial rewards, citing concerns over investor protection and the resemblance to illegal "dabba trading."

By: MD IJAJ KHAN
Updated on: May 29 2024, 07:07 IST
SEBI bans virtual trading apps offering real-time stock data and financial rewards to protect investors. (REUTERS)

The Securities and Exchange Board of India (SEBI) is taking decisive action against the rising popularity of virtual stock trading apps. These apps, which have gained significant traction amid increased interest from retail investors, allow users to create simulated portfolios and compete based on real-time stock prices. SEBI, however, has expressed concerns over the potential risks these apps pose, especially when real-money rewards are involved.

Reasons Behind the Ban

SEBI's primary concern is the resemblance of these activities to "dabba trading," an illegal practice involving the placement of orders through unauthorised channels. By cutting off access to real-time market data for these virtual trading apps, SEBI aims to prevent users from developing unrealistic expectations about the stock market or engaging in risky behaviours based on their virtual performance.

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The regulator has instructed stock exchanges and depositories to cease providing real-time price data to third-party apps. This move effectively disables the data feeds that power these virtual stock games. It's important to note that this directive specifically targets apps offering financial rewards or gamifying real-time stock movements. Apps focused on education or entertainment, using historical or delayed data, are expected to remain unaffected.

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Implications for Users and Developers

The future of virtual stock trading games in India is now uncertain. Developers will need to modify their apps to comply with SEBI's regulations, potentially shifting to non-real-time data or emphasising educational content over competitive elements. Users who enjoyed these apps for entertainment may need to seek alternatives, while those looking for financial rewards will have to look elsewhere.

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This crackdown underscores the evolving regulatory landscape surrounding financial apps and the gamification of stock trading. While virtual stock games can be a valuable tool for learning about the market, SEBI's primary focus is on protecting investors. This regulatory move might spur developers to create more educational and responsible financial gaming experiences going forward.

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First Published Date: 28 May, 13:41 IST
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