Aimed at ensuring transparency, the RBI today floated draft directions for setting up of Electronic Trading Platforms (ETPs) for financial market instruments regulated by it.
As per the draft direction, an ETP operator will be incorporated in India with full managerial and operational control exercised within India.
"Foreign shareholding, if any, in ETP operators should conform to all applicable laws and regulations, including the Foreign Exchange Management Act, 1999," it said.
With regard to capital, it said, the operator should have minimum paid up equity of Rs 25 crore.
The draft framework includes detailed eligibility criteria, technology requirements and reporting standards.
Existing electronic trading platforms would also be required to obtain authorisation under these directions, within six months from the date of issue of these directions.
The RBI has sought comments from market participants and other interested parties on its draft framework by November 10.
Trading on electronic platforms is being encouraged across the world as it enhances pricing transparency, processing efficiency and risk control.
Various financial instruments which would be traded through ETP include money market instruments, foreign exchange and derivatives.
ETP once get approval would undertake due diligence at the time of on-boarding of all members.
It will also maintain all relevant information about the member and ensure that all trades on the system, without exception, are dealt with as per established procedure.
Post the global financial crisis, trading on electronic platforms is being encouraged in several jurisdictions, driven primarily by regulatory initiatives to reform OTC derivative markets, changes in market structure and technology advancement.
Electronic platforms provide several benefits in terms of transparency in pricing, processing efficiency in terms of transaction time and cost, improved risk controls and help in market surveillance by addressing market abuse and unfair trading practices, it said.
These platforms have the potential to positively impact the market structure by broadening market access, increasing competition and reducing dependency on traditional trading methods, it said.
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