RBI Released 34 Illegal Forex Trading Electronic Platforms and Previously Warned People Against Using Them to Conduct Foreign Exchange Transactions.

RBI Released 34 Illegal Forex Trading Electronic Platforms and Previously Warned People Against Using Them to Conduct Foreign Exchange Transactions.

The Reserve Bank of India (RBI) released a list of 34 entities on its website that are not authorized to perform foreign exchange transactions after warning consumers not to undertake forex transactions on unauthorized electronic trading platforms (ETPs) or to send or deposit money for illegitimate forex transactions.

According to RBI, complaints about the authorization status of several ETPs continue to come in. Accordingly, it has been decided to post an “alert list” of entities that are neither authorized to deal in foreign exchange by the Foreign Exchange Management Act (FEMA) nor authorized to run electronic trading platforms for foreign exchange transactions on the RBI website, it says in a release.

The banking authority stated that only authorized parties and in compliance with the provisions of the Foreign Exchange Management Act, 1999, can be used by resident Indians to perform foreign exchange transactions.

The central bank issued a warning that those who engage in foreign currency transactions via unlicensed platforms or for reasons not covered by the Act may be subject to legal action.

Alpari, AnyFX, Ava Trade, Binomo, e Toro, Exness, Expert Option, FBS, FinFxPro, and Forex.com are a few of the 34 companies described as being on an “alert list.” According to sources, OctaFX, one of the organizations that have been listed, is the official sponsor of the Delhi Capitals cricket side in the Indian Premier League.

Some of these platforms’ websites display offers for currency exchange transactions utilizing a variety of cross-currency pairs. On some websites, deposits can be increased by 50%.

Under FEMA 1999, any currency trading that takes place on unlicensed trading platforms or outside of the purview of the recognized exchange is illegal. Unauthorized currency exchange using foreign currency pairings is also illegal and penalized.

A punishment of up to Rs 10,000 may be imposed on the trader for the entire day they engaged in illegal trading. In addition to the first Rs 10,000, the same fine may be assessed for each additional day of infringement. A forex trader who has engaged in illegal activities may also face a five-year prison sentence, according to Section 13 (1C) of the Act.

The public was warned by the RBI in February to avoid engaging in foreign exchange transactions on unlicensed electronic trading platforms or remitting and depositing funds for the same. The RBI’s announcement had coincided with several allegations of victims of bogus platforms.

The RBI website currently includes a list of permitted persons and authorized ETPs, which can be used to identify the permission status of any individual or ETP. In addition, the Central Bank warned, “Don’t presume that the RBI has given its clearance to a company that isn’t on the alert list.

According to reports, ETPs employ agents who individually approach naive individuals to convince them to participate in forex trading and investment schemes by promising them disproportionately high returns. Additionally, reports of frauds carried out by such unauthorized ETPs or portals and numerous residents losing money through such trading or schemes have been made.

According to the RBI, “permitted currency transactions can be conducted electronically, but they should only be undertaken on ETPs allowed for the purpose by the RBI or on recognized stock exchanges, namely, National Stock Exchange of India Ltd, BSE Ltd, and Metropolitan Stock Exchange of India Ltd.”

To establish a framework for the authorization of Electronic Trading Platforms (ETPs) for financial market instruments under RBI regulation, the Reserve Bank of India (RBI) published the Electronic Trading Platforms (Reserve Bank) Directions, 2018 on October 5, 2018.

What is ETP and how RBI regulates it?

Any electronic system, other than a recognized stock exchange, where transactions are conducted using securities, money market instruments, foreign exchange instruments, derivatives, or other instruments of a similar nature (Eligible Instruments), as may be from time to time specified by the RBI, is referred to as an electronic trading platform (ETP).

To establish a framework for the authorization of Electronic Trading Platforms (ETPs) for financial market instruments under RBI regulation, the Reserve Bank of India (RBI) published the Electronic Trading Platforms (Reserve Bank) Directions, 2018 on October 5, 2018.

Any electronic system, other than a recognized stock exchange, where transactions are conducted using securities, money market instruments, foreign exchange instruments, derivatives, or other instruments of a similar nature (Eligible Instruments), as may be from time to time specified by the RBI, is referred to as an electronic trading platform.

The provisions are the main commercial elements that support the activity of ETP.

• The centralized order book for trade reporting, matching, and negotiation
• Complete method for disseminating price/yield and trading information
• Market history data storage and referential upkeep for the exchange administrator
• Rapid market surveillance

According to the Directions, no entity is allowed to function as an ETP without first securing RBI approval. The current ETPs that were in operation at the time the Directions were issued are obliged to submit an application for authorization within 6 (six) months of that date.

ETPs run by banks on a bilateral basis for their clients (who are acting as users) are exempt from the requirements of the Directions provided that they do not grant direct or indirect access to market makers in any market for Eligible Instruments, which would include authorized dealers for the purposes of foreign exchange transactions.

To acquire authorization from the RBI, an entity that operates an ETP must meet the eligibility requirements outlined in Section 5 of the Directions. General, financial, and technological criteria are also included in the eligibility list.

The RBI may impose further requirements if the ETP operator is found to be in violation of the provisions of the Directions or any other rules or regulations or conditions of the authorization. The authorization granted to a business to operate an ETP is not transferable.

edited and proofread by nikita sharma