Transactions in forex via online trading platforms (ETPs)
Electronically executed forex transactions that are permitted must be conducted via E-Trade Platforms (ETPs) They are authorized for the purposes by the Reserve Bank of India (RBI) or on stock exchanges that are recognized (NSE, BSE, MSE). The term “electronic trading platform” refers to an Electronic Trading Platform (ETP) is any system that uses electronic technology, that is not a stock exchange, that allows transactions with eligible instruments such as securities or money market instruments derivatives, foreign exchange instruments, and more. are contract. It is not advisable to operate an ETP without prior authorization from RBI under the Electronic Trading Platforms (Reserve Bank) Instructions, 2018.
Permitted derivatives of forex
There are two kinds of derivatives for the forex market, namely OTC derivatives and exchange-traded derivatives. The derivatives of forex traded on exchanges are described by the term exchange traded forex derivatives. The other derivatives for forex that are traded on ETPs are known as OTC Forex derivatives.
Under OTC derivatives, which are available to retail customers there are derivative options, such as Foreign Exchange Forward, Foreign Exchange Swap, Currency Swap Purchase of Put and Call Options, as well as the purchase of Put and Call Spreads.
However, for non-retail customers all derivative contract for foreign exchange includes covered options that an Authorised Dealer can price and value independently and be approved by the board that is directors of the Authorised Dealer, provided that the risk of loss resulting from the derivative transaction the customer regardless of the scenario is not greater than the loss that the customer would suffer in the event that he abandoned the position without hedging in the first place, The RBI informs. For Exchange exchanged derivatives are two options available, which are Foreign Exchange Future, and Foreign Exchange Option.
