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30th April 2024 (14 Topics)

Electronic Trading Platforms (ETPs)

Context

The Reserve Bank of India (RBI) released a draft Master Direction for Electronic Trading Platforms (ETPs) in the wake of increased integration of the onshore forex market with offshore markets.

Key Highlights of the Draft Master Direction - RBI (Electronic Trading Platform Directions, 2024)

Need for Regulation: The RBI's move comes in response to concerns raised about unauthorized entities offering forex trading facilities with promises of high returns.

  • Minimum Net-Worth Requirement:Entities applying for authorization as Electronic Trading Platform (ETP) operators must maintain a minimum net worth of Rs 5 crore. This requirement is to be upheld continuously to ensure financial stability and resilience.
  • Incorporation in India: The entity seeking authorization as an ETP operator must be a company incorporated in India.
  • Shareholding Compliance: Any shareholding by non-residents in the entity must comply with all relevant laws and regulations, including the Foreign Exchange Management Act, 1999.
  • Technology Infrastructure: ETP operators are required to maintain robust technology infrastructure characterized by high reliability, availability, scalability, and security.

Fact Box: About ETPs

  • In 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.
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