India's SEBI Warns Against Unregistered Prop Trading Apps

India's Securities and Exchange Board (SEBI) has issued a warning against unregistered apps and platforms offering virtual trading, paper trading, or fantasy stock market games based on listed company data. These activities, SEBI stated, violate the Securities Contract (Regulation) Act, 1956, and the SEBI Act, 1992, which are designed to protect investors.

The advisory comes as prop trading platforms, which facilitate trades without directly handling client funds, face increasing regulatory scrutiny globally. SEBI's statement emphasized the risks associated with such platforms: "Participation in unauthorised schemes, including sharing confidential and personal trading data, is at investors' own risk, cost, and consequences, as such schemes/platforms are not registered with SEBI."

India's regulatory framework for retail trading remains fragmented. While retail CFD trading exists in a legal grey area, prop trading platforms remain unregulated. The Reserve Bank of India recently added several such platforms to its caution list, highlighting ongoing concerns.

Global regulators have also taken notice, with Italy likening prop trading to "video games" and Belgium and Spain issuing similar warnings. SEBI's latest advisory urges investors to avoid unregistered intermediaries, signaling its intent to clamp down on unregulated activities in India's growing trading ecosystem.