Sebi Opens Sandbox to Fractional Share Pitch

The Securities and Exchange Board of India (Sebi) has approved a proposal from a startup to test fractional shares in its innovation sandbox, marking a potential shift in the Indian equity landscape.

- KHUSHBOO TIWARI

This represents a change in stance from 2021, when Sebi rejected a similar proposal in the regulatory sandbox, primarily due to concerns over the custody of fractional shares.

Fractional shares allow investors to own or trade portions of a single share rather than being limited to whole units—a practice already popular in the US.

Earlier this month, Bengaluru-based Xaults joined Sebi's innovation sandbox to pilot fractional share trading. Cofounder Neeraj Singh said the company will demonstrate various use cases to Sebi and other market participants over the next three to four months. However, full-scale live testing will proceed only if Sebi moves the firm into the regulatory sandbox.

Singh emphasized that the crux of their successful application was a custody framework: fractional shares would be held at the depository rather than at the broker level.