RBI proposes currency trading platform for retail customers

Retail market will be separate from the inter-bank market; maximum order size would be $500,000

The Reserve Bank of India (RBI) on Thursday proposed retail customers’ access to the currency trading platform, and that prices should be in line with the inter-bank market through an in-built mechanism on the platform. 

In a discussion paper on its website, the central bank said the existing FX-CLEAR platform should be extended to the retail customers of through an internet-based application. 

However, the retail market will be separate from the inter-bank market. While banks can access both the institutional and retail markets, retail customers would be limited to the retail market segment of the platform. 

Both the markets will have the same timings, 9 am to 5 pm, where orders can be placed anonymously. 

The minimum order size would be $1,000 and thereafter in multiples of $500. The maximum order size would be $500,000 for retail customers. 

“The system will have a functionality to aggregate customer orders at the same rate up to the minimum lot size of the inter-bank market (of) $0.5 million and match it with the orders in the inter-bank market. This will ensure that prices in both the markets are in line,” the discussion paper said. 

Since direct execution by the customer is likely to bring down the cost of transactions as there is no market risk to the bank, the lenders should charge their customers a fee towards processing expenses only. 

In a separate notification, the central bank said an electronic trading platform (ETP) operator for forex, bonds etc for retail customers should have a minimum paid up equity capital of Rs 25 crore, and should hold liquid assets such as cash, government securities and bank deposits equal to at least six months of current operating expenses at all times.

All data related to trades generated in the trading platform should be maintained in India for at least 20 years. 

“No data shall be exported outside India without the prior permission of the Reserve Bank,” the central bank said. 

Foreign shareholding will be allowed according to norms and the operator should preferably have experience, of at least three years, in operating infrastructure related to trading of financial instruments.

The operator would be in constant scrutiny of the central bank. 

“An ETP operator will ordinarily not be eligible for authorisation, if within the last 5 years, it or any of its directors or promoters or senior officers have been subjected to adverse action that the Reserve Bank considers material, by any regulator or any other public authority,” the central bank said.