RBI releases Draft Master Direction – Reserve Bank of India (Electronic Trading Platforms) Directions, 2024.
About Electronic Trading Platforms (ETPs):
- ETPs are digital systems that facilitate the trading of various financial instruments outside of traditional stock exchanges.
- They allow direct trading between buyers and sellers.
- They enable faster and more efficient trading than traditional methods.
- ETPs offer increased transparency and liquidity in the market.
- They provide access to a wide range of financial instruments, including securities, derivatives, and foreign exchange products.
- Regulated by financial authorities to ensure fair and orderly trading.
- Examples of ETPs include Alternative Trading Systems (ATS) and Electronic Communication Networks (ECNs).
About Draft Framework for Electronic Trading Platforms:
- The framework was first introduced in October 2018 to ensure fair access, transparency, safety, efficiency, and prevention of market abuse.
- It was revised in response to increased integration of the onshore forex market with offshore markets and requests from market makers for access to offshore ETPs offering Indian Rupee (INR) products.
- 13 ETPs operated by 5 operators have been authorized under this framework since its introduction.
Criteria for Authorization of ETPs:
- Entities seeking authorization as ETP operators must:
- Be incorporated in India.
- Maintain a minimum net worth of Rs 5 crore at all times.
- Ensure non-resident shareholding complies with all applicable laws, including the Foreign Exchange Management Act, 1999.
- Maintain robust technology infrastructure with high reliability, availability, scalability, and security to support operations and manage associated risks.
- Only transactions in instruments approved by the RBI can be contracted on ETPs.
- No entity, whether resident or non-resident, can operate an ETP without obtaining prior authorization or registration with the RBI.
- Comments on the draft directions are invited by May 31, 2024 from ETP operators, banks, market participants, and other interested parties.
Ref: Source
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