Financial market participants will be barred from trading for around a month if found guilty of market abuse, the RBI said on Friday.
In the Reserve Bank of India (Prevention of Market Abuse) Directions, 2019 released during the day, the central bank noted that 'market abuse' includes market manipulation, benchmark manipulation, misuse of information and other such practices.
The directions would come into force with immediate effect, the RBI said.
"Market participants committing market abuse are liable to be denied access to markets in one or more instruments for a period that may not exceed one month at a time," the notification said.
"No such action shall be taken by the bank without providing reasonable opportunity to the market participant to defend its actions. All instances of such action shall be made public by the bank."
According to the directions, a market participant who is in possession of 'non-public price-sensitive information' should not use it for any material benefit to itself or to others.
"Market participants shall not use 'price-sensitive customer information' for transacting on their own account in a manner that adversely affects the outcome for the customer in that (those) transaction(s). They shall maintain confidentiality of price-sensitive customer information," it said.
Further, the central bank mandated the participants to report any detected instance or attempt of market abuse to the bank promptly.
No market participant should carry out a transaction or initiate any action with the sole or dominant intention of influencing a benchmark rate or a reference rate, it said.
The the directions have been released after reviewing public comments on the draft directions were made public on September 28, 2018.
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