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How Can A Citizen Undertake Forex Transaction?

Forex Transaction
Written by Zimmy
How Can A Citizen Undertake Forex Transaction?:  In India the country of residence, residents are allowed to conduct forex transactions only with authorized individuals and for permissible purposes according to the Foreign Exchange Management Act, 1999 (FEMA). RBI declares to the public that an official is a person which has been granted permission to be authorized by authorities of the Reserve Bank of India to engage in transactions in forex.
It could be an authorized dealer or money changer, an off-shore bank, or any other entity that is currently legally authorized by Section (1) of Section 10 of FEMA.

 

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.

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