The Reserve Bank of India (RBI) has introduced a revised regulatory framework for Electronic Trading Platforms (ETPs) in response to the growing integration of the onshore forex market with offshore markets. This move comes as market makers have called for access to offshore ETPs that offer Indian Rupee (INR) products. ETPs refer to electronic systems, outside of recognized stock exchanges, where transactions in eligible instruments take place. These eligible instruments include securities, money market instruments, foreign exchange instruments, derivatives, and similar instruments.

The newly proposed ‘Draft Master Direction – Reserve Bank of India (Electronic Trading Platforms) Directions, 2024’ states that entities seeking authorization as an ETP operator must maintain a minimum net-worth of Rs 5 crore and continue to meet the prescribed minimum net-worth at all times. Additionally, the entity must be an Indian company, and any non-resident shareholding in the ETP operator should adhere to relevant laws and regulations, including the Foreign Exchange Management Act, 1999.

Furthermore, the ETP operator must maintain a robust technology infrastructure with a high level of reliability, availability, scalability, and security for its systems, data, and network to support operations and manage associated risks.

The RBI had previously established a regulatory framework for ETPs in October 2018. The framework aimed to ensure fair access, transparent and safe trading processes, robust trading infrastructures, and prevention of market abuse. Since then, 13 ETPs operated by 5 operators have been authorized.

With the increased integration of the onshore forex market with offshore markets, technological advancements, and product diversity, the RBI emphasizes that ETP operators authorized by or registered with the RBI should only facilitate transactions in instruments approved by the central bank on their platforms.

The draft directions also highlight that no entity, whether resident or non-resident, can operate an ETP without prior authorization or registration with the Reserve Bank.

Interested parties, including ETP operators, banks, and market participants, are invited to provide their comments on the draft directions by May 31, 2024.