The Securities and Exchange Board of India (Sebi) in a circular issued on Monday proposed a framework to share market data with financial technology firms to brainstorm and create innovative solutions for capital markets. This is also referred to as innovation sandbox.
Innovation sandbox is a shared workspace to ideate, explore new subjects, develop technologies and share knowledge.
"To create an ecosystem which promotes innovation in the securities market, Sebi feels that fintech firms should have access to market related data, particularly, trading and holding data, which is otherwise not readily available to them, to enable them to test their innovations effectively before the introduction of such innovations in a live environment," said Sebi in the circular.
Sebi is opening up the space to allow fintech firms which are not registered with it to be a part of the sandbox. Fintech firms meeting Sebi criteria will have access to anonymous, historical data from exchanges, depositories and mutual funds.
The data sets would include--KYC data, transaction data such as order log and trade log also mutual fund transaction data.
To prevent any misuse the use of datasets will be governed by comprehensive confidentiality agreement clearly specifying that the datasets cannot be sold or sublet or shared in any manner with any other entities.
The sandbox will be governed by a governance body comprising of representatives from the bourses, depositories and Qualified Registrar and Share Transfer Agent (RTAs).
"Conceptually, the innovation sandbox framework is applicable to any entity, who intends to innovate on the products, services, and/or solutions for the securities and commodities market in India," said Sebi in the circular.
Sebi mandated that market infrastructure institutes (exchanges, depositories) and RTAs form a steering committee within 15 days to develop operational guidelines for the sandbox. The guidelines would be provided within two months.
"The steering committee shall also be responsible for registering/onboarding the applicant post approval of the application and monitor the participant throughout the lifecycle of the project," said Sebi.
Initially, the onboarding of participants will be manual but later Sebi wants the entire sandbox participation lifecycle--applying, tracking, on-boarding, monitoring, reporting to be digital. The transition would happen within 24 months.