RBI Offers New Guidelines for Platforms Online Trading

Published : 1 May 2024
Updated : 23 May 2024
RBI Offers New Guidelines for Platforms Online Trading

As the onshore currency market becomes more integrated with external markets and market makers push for access to offshore ETPs that offer Indian Rupee products, the Reserve Bank of India (RBI) has proposed new guidelines for ETPs.

To ensure fair access, transparency, safety, efficiency, and a decrease in market abuse, the RBI developed a set of rules for exchange-traded products.

Thirteen Exchange-traded products of this type have since been approved by five operators.

The increased diversity of goods, increased market efficiency, and progress in technology have led to increased collaboration between the inside and outside foreign currency markets.

Addressing Electronic Trading Websites

Online marketplaces that enable trading of a variety of financial instruments, including derivatives, securities, and foreign exchange products, are known as electronic trading platforms, or Exchange-traded products. Exchange-traded products function independently from regular stock exchanges and offer a venue for direct trading between buyers and sellers. 

1. Permit more efficient and rapid transactions than traditional methods.

2. Increase market transparency and liquidity.

3. Provide access to a range of financial tools. 

4.  overseen by financial regulators to guarantee balanced and regular trading 

5. Electronic communication networks and alternative trading systems (ATS) are two examples (ECNs) 

Suggested Criteria for Exchange Traded Products Operators 

1. Applicants for registration to operate exchange-traded products must always have a minimum net worth of Rs 5 crore. 

2. The organization needs to be an Indian corporation. 

3.  Investors who are not residents of the company have to agree with the Foreign Exchange Management Act 1999 and any other relevant laws and regulations.

4. To support operations and control related risks, the business needs to maintain an efficient technological infrastructure with high levels of availability, flexibility, safety, and reliability. 

Acceptable Instruments and Permission 

Actions in securities controlled by the Reserve Bank of India may only be contracted on an ETP operator's platform, per RBI regulations or those approved by them. Any kind of business may conduct an Exchange-traded product as long as it has been approved before or is registered with the RBI. The RBI is requesting feedback on the draft rules from banks, market players, ETP operators, and other interested parties by May 31, 2024.  

The proposed changed ETP regulations system attempts to tackle two main issues: the foreign exchange market's evolution and the increasing merging of onshore and offshore markets. The RBI wants to make sure that only approved securities are traded on these platforms and that ETP operators are bound by clear regulations that manage the risks involved in promoting equity, efficiency, and transparency. The central bank has indicated that it is willing to work with interested parties to create this framework and is currently seeking their input.