Regulatory Sandbox Framework for Stock Market Ecosystem approved by Sebi
The regulatory sandbox framework for stock market ecosystem was approved by the Securities and Exchange Board of India.
Live testing new financial technology (fintech) solutions on customers without having to be fully licensed is the basis of this term. However, this is done under strict regulatory supervision.
The new framework gives permission to live test on a small set of customers for a limited period of time in a live environment. Sebi said that all necessary safeguards shall be taken for investor protection and risk mitigation.
It is based on a discussion paper floated a year ago.
Sandeep Parekh, managing partner, Finsec Law Advisors, said that this will push the envelope on innovation and competitiveness in the security markets.
The applicant would have to demonstrate how the proposed solution would add value to existing offerings in the Indian securities market besides incorporating risk management strategy to become eligible for the live testing.
Sebi will evaluate and approve applications by appointing an officer to oversee the project. Applicants would have to inform clients about the risks. Depending on the results, Sebi will decide if it can be introduced to the market.
Sebi might, during testing, revoke approval if the applicant suffers a loss of reputation, carries on business in a manner detrimental to users or fails to address any technical defects.