I have been researching for about 10 hours on this and am unable to find anything conclusive.
Is it legal to trade stocks in USA’s stock exchanges as an Indian citizen*?
How(what are the technicalities involved to make sure that I do it legally)?
Can you please give me the RBI circular regarding it?
I know for a fact that it is illegal to trade derivatives in the USA from India.
Thank you for reading.
*I intend to trade with a foreign broker who obviously won’t have a DEMAT integration.
It is not illegal to trade in US stock exchange. In fact a lot of Indians living in US trade in that market. But you need a Social Security Number (SSN) to open a brokerage account. This is so that the income from trading/investing can be accounted for and taxed - but it can only be obtained if you are or have have been to US.
Not sure if there are other ways to open a brokerage account in US. I am just sharing based on my personal experience as I trade in both the markets.
I have social security account as I worked in US but now in India…it was in 2007 i worked there for 6 months…what else documents required apart from social security number?
Yep investing into US stocks or real estate upto $250k per year per person is allowed for Indian citizen. And yes any kind of margin product (equity leverage, F&O, etc) is not allowed.
How to buy stocks on US stock exchanges? I think currently Kotak and ICICI direct have tie up with saxo bank for this. We might have some interesting news on this in the next couple of months.
Is it legal to use a foreign (maybe a US) broker for this purpose or is it necessary for it to be done through an Indian broker only? How to avoid double taxation if I use a US broker?
I’ll be following your blog and other channels so that I can get updates by your company regarding it.
You have to use a US broker dealer, Indian companies can’t be brokers in US. There is a Double taxation avoidance agreement with US. So you won’t be taxed twice.
I don’t think so one can buy leveraged or inverse etf’s, as leveraged etf’s in-turn use derivatives like fut,options and swaps in their portfolio which are again leveraged products.
@siva: By that arguement one cannot buy a company that has a leveraged balance sheet. My question here is whether we can distinguish between leverage and margin. Please note when buying levered ETFs no margin is required. Any idea ?
@siva: Indeed. But so does corporates that hedge their FX or interest rate exposures via corporate treasury - and you own a share of that balance sheet like you do in case of ETFs. I guess the restriction is to use margin to buy listed instruments rather than buy leveraged instruments in general. Wonder who can give a legal answer ? Would this be under the purview of SEBI or RBI ? I think FEMA - so RBI right ?
@nithin: Thanks, but I am not sure if the true spirit is to prevent margin trading or having leverage. I am guessing that margin is barred to remove the hassel of international defaults for small amounts, but I cannot see the rationale to prevent leverage as long as its limited to the net cash position. Will investigate more and post if I get a clear answer.
Cryptos are specifically barred. Also as of now I can only find SEBI registered brokers that allow trading in US markets and to the best of my knowledge - they have not yet approved any crypto ETF listed in US exchanges. But then I am not a cryto expert.
In case a broker does offer instruments that are not compliant, who is eventually liable in your personal opinion ? The broker or the investor ?
Both. But if the broker is registered outside Indian jurisdiction, then just the investor.
Btw we are lucky that Indian govt now allows to freely move upto $250k USD for purpose of investing.
I guess one of the reason why margin products are not allowed is because what happens if you have a MTM loss and need more money to be transferred (but you have already exceeded the quota of sending $250k).
