Framework for Innovation Sandbox
Summary
SEBI establishes an Innovation Sandbox to allow FinTech firms and unregulated entities to test solutions using anonymized market data in a controlled environment. The framework outlines design, legal, and administrative components, including specific eligibility criteria for applicants regarding testing readiness and consumer benefits. Implementation is managed by a Steering Committee comprising representatives from Market Infrastructure Institutions and Qualified Registrar and Share Transfer Agents.
Text
SEBI is proposing an “Innovation Sandbox”, which would be a testing environment where FinTech firms and entities not regulated by SEBI including individuals (hereinafterwards referred to as participants/applicants) may use the environment for offline testing of their proposed solutions in isolation from the live market, subject to fulfillment of the eligibility criteria, based on market related data made available by Stock Exchanges, Depositories and Qualified Registrar and Share Transfer Agents (QRTAs).
Indicative datasets which may become part of the Innovation Sandbox are as follows: I. Depositories data: Holding data, KYC data II. Stock exchange data: Transactions data like order log, trade log III. RTA data: Mutual fund transactions data
The datasets shall be historical and anonymized data and shall also contain data related to episodic market events. Live data shall not be made available to participants.
The use of datasets shall be governed by comprehensive confidentiality agreement which shall include an ‘End User Agreement’ clearly specifying that the datasets made available shall not be sold or sublet or shared in any manner with any other entities.
The Innovation Sandbox can be set up as a separate not-for-profit entity which enhances the impartiality of the Innovation Sandbox.
The Innovation Sandbox should ensure that all applicants can perform their testing without breaking any regulatory barriers, including compliance with investor protection, Know Your Client norms, data integrity or any other Indian laws.
The Innovation Sandbox should have the relevant provisions to protect the applicants’ IPR. Also, it should define how the IPR which results from the collaboration can be used once the testing phase has ended.
The Innovation Sandbox should have provision for restricting development of any product/ solution for fraudulent/ manipulative purposes.
A governance body shall be formed comprising of representatives from the Stock Exchanges, Depositories and Qualified Registrar and Share Transfer Agents. This body shall supervise the operations of the Innovation Sandbox in the interests of its contributors, users and securities market in general.
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.
The solution shall be validated for cyber security parameters. The applicant is required to submit a cyber-security compliance certificate as per SEBI’s Cyber Security guidelines.
A Steering Committee comprising of representatives from the Market Infrastructure Institutions (MIIs) and QRTAs shall develop the operating guidelines... The Steering Committee shall also include members drawn from the areas of FinTech start-ups, academia and angel investors or any other area as may be prescribed by SEBI.
You have read the preview. Create a free account to read the full document and see every order that applied it.
Free accounts include 10 searches/day with full text access.
Source: SecMarx — Framework for Innovation Sandbox. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.