Mumbai: The markets regulator on Friday issued a circular announcing how financial technology firms could find innovative solutions for the stock market ecosystem by testing on actual customers without hassles of registering in a controlled environment.
Market entities regulated by Securities and Exchange Board of India (Sebi) will be granted certain facilities and flexibilities to experiment with financial technologies solutions in a live environment and on a limited set of real customers for a limited time frame, Sebi said in the circular.
"These features will be fortified with necessary safeguards for investor protection and risk mitigation," Sebi said.
This framework is based on discussion paper issued on 29 May 2019. Firms who wish to participate in the so-called regulatory sandbox would need to fulfill certain criteria. The firms would need to prove that proposed idea is innovative and adds significant value to the existing offering in the Indian securities market and should have a genuine need for live testing the solution on real customers. The project should be test ready and could be scaled up for usage by larger set of investors. The entity would need to have risk management strategy to mitigate and control potential risks to any market participant.
The proposal would be evaluated by the concerned department. For instance if the proposed solution is to improve efficiency of investigations then it would be assessed by Sebi's investigation department. The proposal would then be evaluated and overseen by a designated officer.
The firms applying for testing in sandboxes would need to make their clients aware of the risks involved during testing. They will also have to ensure that the “users participating in the sandbox have the same protection rights as the ones participating in the live market".