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

The Securities and Exchange Board of India (SEBI) is taking decisive action against the growing popularity of virtual stock trading apps. These apps have attracted significant attention amid growing retail investor interest, allowing users to create simulated and competitive portfolios based on real-time stock prices. . However, SEBI has expressed concerns about the potential risks these apps pose, especially when real money rewards are involved.

Reasons behind the ban

SEBI’s main concern is the similarity of these activities to “dabba trading”, an illegal practice that involves placing orders through unauthorized channels. By cutting off these virtual trading apps’ access to real-time market data, SEBI aims to prevent users from developing unrealistic expectations about the stock market or engaging in unethical practices. micro-risk based on their virtual performance.

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The regulator has directed stock exchanges and depositories to stop providing real-time price data to third-party applications. The move effectively disables the data feed that powers these virtual stock games. It is important to note that this directive specifically targets applications that offer financial rewards or game real-time stock movements. Apps focused on education or entertainment, using historical or delayed data, are not expected to be affected.

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Implications for users and developers

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

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This crackdown highlights the evolving regulatory landscape around financial apps and the gamification of stock trading. While virtual stock games can be a valuable tool to learn about the markets, SEBI’s main focus is on protecting investors. This regulatory move could push developers to create more educational and responsible financial gaming experiences in the future.