The new framework is also aimed at increasing participation in the innovation sandbox.
This would be achieved by giving access to both test data and test environment to financial institutions, financial technology (fintech) firms, start-ups and entities not regulated by Sebi including individuals, the regulator said in a statement.
Innovation sandbox facilitates access to an environment (testing facilities and test data) provided by enabling organisations like stock exchanges, depositories and qualified registrar and share transfer agents (QRTAs), wherein innovators (sandbox applicants) would test their innovations in isolation from the live market.
According to Sebi, capital market participants in India have been early adopters of technology. It believes that encouraging adoption and usage of fintech would have a profound impact on the development of the securities market.
Fintech can act as a catalyst to further develop and maintain an efficient, fair and transparent securities market ecosystem.
To create an ecosystem that promotes innovation in the securities market, Sebi is of the opinion that fintech firms should have access to market-related data which is otherwise not readily available to them. They should also have a test environment to enable them to test their innovations effectively before the introduction of such innovations in a live environment, it said.
Accordingly, the regulator had issued a framework for innovation sandbox in May 2019 with the intent to promote innovation in the securities market.
"Based on learnings since then and to make it even more convenient for participation in the innovation sandbox, revised graded entry norms have been designed with the objective of promoting innovation both in terms of new products and services as well as new ways of delivering existing products and services," as per the statement issued on Wednesday.
In addition, it is aimed at creating new opportunities in the securities market and to make existing services more efficient and investor friendly.
With regard to stages of innovation sandbox, Sebi said that during the first stage, limited access to the test environment would be provided and there would be a cap on the utilisation of resources in terms of processing power, memory, and storage, among others.
During the second stage, the cap on the utilisation of resources would be removed, subject to availability of resources at that point of time.
Further, the regulator has also put in place eligibility criteria for both the stages.
In addition, a steering committee comprising representatives from Sebi and the enabling organisations has been formed to drive the innovation sandbox. The committee would supervise the operations of the innovation sandbox.
Also, it would process the applications submitted by sandbox applicants and approve or reject applications and assign lead enabling organisations.
Such lead enabling organisations would be responsible for onboarding the applicant post approval of the application and monitoring the applicant throughout the lifecycle of the sandboxing.
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