RBI issues draft master direction for electronic trading platforms

The Reserve Bank of India (RBI) on Monday released a draft Master Direction for Electronic Trading Platforms (ETPs) and also invited comments and feedback from operators, banks, market participants, and other interested parties by May 31.

The draft directions follow the RBI Governor Shaktikanta Das’s February monetary policy statement, where he highlighted the intention to review the regulatory framework for electronic trading platforms. The aim is to facilitate market makers' access to offshore ETPs offering permitted Indian Rupee (INR) products.

In October 2018, the RBI had introduced a framework for the authorisation of Electronic Trading Platforms to facilitate transactions in financial market instruments under its regulation. ETPs, distinct from recognised stock exchanges, are electronic systems enabling the trading of eligible instruments such as securities, money market instruments, foreign exchange instruments, derivatives, etc.

The master directions come after the RBI on Wednesday flagged unauthorised entities offering foreign exchange (forex) trading facilities with promises of exorbitant returns. The central bank said that authorised dealers should promptly report such transactions to the Enforcement Directorate when they detect such instances.

Upon investigation, the RBI noted that to facilitate unauthorised forex trading, these entities have employed local agents to open accounts at various bank branches for the purpose of collecting money related to margins, investments, charges, and more. These accounts are established under the names of individuals, proprietary concerns, trading firms, etc.