All US trading/investing from india questions answered

General
1

I have made this blog just to make sure no one wanders like me digging for answers related to legal issues while trading US stocks.

Some people don’t answer these when approached, they don’t understand that if they answer they’re not only helping them but also other people from falling into legal issues.

So please if you know the answer just answer them.

If there are any more questions add them in the comments, I’ll add them here if I know the answer.

Note: this including my comments should not be considered like any kind of legal advice!

Here are the things I found:

1.) What type of accounts can be opened for trading/investing US stocks?
Ans: Only cash account can be opened, even if broker allows margin account, don’t open it, it’s illegal.

2.) what is a cash account.
Ans: In this account, you get 0 leverage/margin, you pay full price on whatever stocks you long.
You are not allowed to short stocks with a cash account, shorting requires a margin account?

3.) what is PDT rule?
Ans: PDT only applies to margin account with cash below $25k and also only applies for brokers which are operated in the USA.
Example: Say you have a margin account with $20k (which is below $25k required for no PDT)
You can only do 3 daytrades a week, that’s what PDT means.

4.) what is GFV (Good faith violation)?
Ans: GFV applies to the cash account, If you sell a share before it is settled that’s called GFV violation
US stocks take T+2 days for the cash to settle,

Say you have a cash account of $1000, so if you buy $1000 of X stock on Monday, and sell the same day, that cash will be back in your account on Wednesday, in that case, you have no more cash to buy and sell. at this point, if you buy another stock and sell before Wednesday(before cash is settled) that’s when GFV happens and your account might get locked for 90 days.

5.) can we do intraday/daytrade in US stocks?
Ans: In RBI circular we have seen they mentioned to remit money for investment, not for intraday, but they never mentioned to not get into intraday, but I would say this is a grey area, better be away, it’s your wish.

6.) can we do swing trades?
Ans: Swing trades might fall under short term investments this is not considered a day trade, so it might be legal to do so.

7.) Options?
Ans: RBI prohibits those.

8.) How to open an account?
Ans: My best broker: Webull(no minimum, no commissions) - never seen an app with so many features.

Here’s a referral link to the broker, you get two free stocks for signing up: Sign up

online charts can be accessed here without signing up: https://app.webull.com/trade

There are other broker I would lightly recommend:

Vested(from India): But they’re new and don’t have many stocks like webull
Interactive brokers: well pay for commissions $1 for trade.
TD Ameritrade: No commissions and no minimums but the application process is too long.

9.) how to deposit money at the broker?
Ans: Even if the broker allows online wire transfer(where there might be no option for what purpose you’re remitting money) don’t do it, only transfer money through A2 form by visiting your bank

6 Likes
2

Why so hurdles Zerodha working on it
Lets wait,

8.) No need to open new account, zerodha might let us do it with our exiting accounts.

9.) We can easily do the investment with our own currency rupees, that’ll be link with zerodha account, no need of filling forms, visiting banks etc
It will be simple process :crossed_fingers:

3

Zerodha might bring, I feel bad to talk about this on this platform related to zerodha but you won’t get all the stocks covered in the US like what webull does.

Also the tools, i found in webull, I have not found in any foreign or indian broker so far.

It’s better that test it yourself.

4

About Webull i could’nt find any wikipedia page of that company?
It might be small fintech company

5

Yeah, it’s newly founded in 2016, You can find about it on Benzinga, also if you doubt you can check Alexa score for that website,

Also, you can access the online platform here without signing up just for charts: Online platform

6

@lazy Please explain more about difference bw wire transfer and a2 form as you mentioned.

@Mehdi_Abbas i heard upstox bringing that international investing update, are you sure the same for zerodha?pls mention the link n approx. Time when we can have that feature

7

In case of foreign brokers, while depositing online through wire transfer they may mention to do via netbanking, but our banks through online won’t have the purpose code for “portfolio investment” which needs to declared as the reason while remitting money from india to a foreign broker.

So A2 is a form which can be filled at the branch of the bank to remit money to your broker.
A2 form includes the option to mention the reason for remitting money.

You can google purpose codes online for LRS.

2 Likes
8

Yes zerodha working on US investment project
It might take some time,
No timeline as of now from them

9

I am getting only China and US option while registering for webull. There is no citizenship option of India.

Please help?

10

how come, that’s weird, hope you’re from india and not using any vpn

11

I faced a similar issue like this today (not using any VPN). But then I tried to continue the account opening process using their mobile app instead and there it did end up showing India as an option for the country of residence

12

@lazy Recently, I came across an article which talked about moving the whole LRS process online (including the filing of A2 Form) - Investment in foreign stocks gets easier as LRS goes online | Mint. Even though that is limited to a specific Indian fintech and private bank, I wanted to ask if something similar has also been implemented by any of the foreign brokers mentioned above?

13

Just got an email today morning from HDFC Bank that they have enabled investing in US stocks through their HDFC InvestNow platform. The US brokerage firm that will hold the shares in US is DriveWealth (same as that of Vested Finance). Finally the dawn of a bright and glorious day.
https://www.hdfcsec.com/globalinvesting

14

@siva @nithin are you close on USA platform , any thing expected to invest in USA , if zerodha will open a door to invest in overseas

15

Not yet, look like this may take more time than anticipated due to current situation.

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16

You can check with HDFC Bank as they have enabled it recently. I already posted the link above – https://www.hdfcsec.com/globalinvesting

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17

Interactivebrokers allows trading in global markets…Check their website or customer support.

18

I know some people at icici, they assisted me to do transfer via online. Through icici money2world but there is no option there for LRS portfolio investment… So you need someone from Bank to assist you.

Normally it’s not possible, you need an expert from Bank.

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19

LRS transactions through HDFC Bank are entirely online now. You don’t need to visit bank or submit hardcopy of Form-A2 by visiting any bank. I use HDFC hence I can only speak for them. I am not aware of other banks.

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20

Where does RBI or FEMA or another law applicable to resident Indian citizens prohibit BUYING options? Please share link or text of rule, etc. Thanks