Can we all just not request NSE/BSE to start the global futures(SP500,Dow,Nasdaq) again in extended trading hours till 12: in night. Or request RBI to allow trading in margin account in global market. If we all jointly take effort then it might be possible. Please share your views.
Very few trade in India. Out of that few again very few care about trading s&p500 or Eminis etc… liquidity therefore is going to be next to nothing until 2030
In India,Unlike in other places, retail traders are treated as a problematic lot(and maybe rightly so) by SEBI. And generally speaking, In India a lot of things take a lot of time to change. It’ll change for sure, but we’ll be old by then
how this will work?
the friend is very generous he opens his acccount he deposits his money and we both share our views and trade.if profit he sends me some money as gift and if loss he scolds me
The friend operated account route is a risky one from a legal perspective and not recommended. What @HFT has suggested is to set up a structure overseas, costing around 10lks(any business entails set up costs), which is legally safe. Of course that’s only for experienced traders and quants, not for the general retail trader.
If that friend of yours is an NRI or PIO, then SEBI regulations require you to get registered as an Investment Advisor, and that’s something you don’t want to do. Make sure the person you trade for is a foreign citizen and obtain a Power of Attorney to manage his/ her account.
Refer to Q 21 in the article below:
Other than that, there’s only one way through which a resident Indian can trade in foreign securities (E-mini S&P):
- Under Section 6(4) of the Foreign Exchange Management Act, 1999, a person resident in India is free to hold, own, transfer or invest in foreign currency, foreign security or any immovable property situated outside India if such currency, security or property was acquired, held or owned by such person when he was resident outside India.
This takes a lot of effort, but at least you can trade your own account.
Refer to Q 16 in https://www.rbi.org.in/scripts/FS_FAQs.aspx?Id=66&fn=5#q17
Disclaimer: This is not expert advice, and kindly note that the said information is not a substitute for the relevant regulations and requirements which are specified by the authorities from time to time.
I doubt that’s a good idea…Nithin has already commented on that being tricky
Will check if it’s possible to trade for foreign citizen by obtaining POA
No he went for on-site for few years to California he will be returning to India after that
Best to avoid any third party transactions like gifting to friend and family to trade on your behalf.
Not worth it, best to strucuture.
It actually only costs 8lk.
Please take no offense, but do you have something useful to offer here, other than posting things like -
And these are just from this thread alone!
I have helped many people setup funds in US.
I worked as a consultant.
A resident indian can set up a company aborad which does the trading , its possible to set up a company trading own funds in singapore , hongkong or UAE freezones (many more ).this might involve annual costs up to 2-4 lakhs , depending on where you set up your company.
But can someone advise how will RBI/Indian laws treat such company , would it be considered a shell company used to trade futures indirectly , given that the only activity the company is doing is trading and nothing else ?
other than this, only option that looks feasible is the one suggested by @GodFather ( Section 6(4) ) , if you have funds that were earned abroad and kept abroad, not everyone is lucky to have a close relative abroad to get a trading account.
Yes as per FEMA, no entity(including individuals or firms) set up by a resident indian may indulge in leveraged trading… there’s no ambiguity with regards to such an activity being illegal… however if the firm doesn’t use any starting capital remitted from India, it can remain undetected. But then you would have to pay taxes to foreign governments and show that to Indian authorities while filing your returns, besides some day you’ll want your profits to be brought back right?
As per FEMA , an indian business entity including resident individual is allowed to invest in wholly owned subsidiaries aborad, provided the WOS is engaged in bonafide business activity in the host country. there are some restrictions on the activities, like it cant be engaged in financial services, but since you are trading your own money it wont be considered as ‘Services’
Also, As fer FEMA trading in derivatives abroad is a permissible capital account transaction. people tend to believe its illegal just because its not allowed under LRS.
So if you set up a WOS abroad and follow all host country laws and follow the restrictions for the WOS under FEMA like
- an entity engaged in financial services outside india, should be profitable in india for 3 consecutive years.
- individuals are prohibited from financial services abroad.
I think it should be good.
My only concern is how do you declare the profits and business activity conducted abroad by the WOS, to the indian Authorized dealer every year.
eg : what is the nature of business ?
I dont think FEMA anywhere says, you cant do leveraged trading abroad.
A WOS carrying out Bonafide business activity is different…if am selling chocolate bars here in India and I want to expand abroad etc that’s totally fine. What’s not permitted is setting up an entity for the exclusive purpose of financial securities trading.
Now my chocolate company can use the money generated in the course of doing business towards purchase of securities. Problem is I don’t have a chocolate company and its too much work to get into chocolate business just to actually conduct financial trading.
Yeah but that’s like if am having an airliner and want to hedge to keep fuel costs from adverse fluctuations arising out of crude oil supply shocks etc…and individuals never need to be doing anything of this sort…if you are an exporter different story
This is like Paytm expanding to other countries etc… once again not for a retail trading scenario
If I have a WOS selling chocolates and profit is 1 million and I roll it over entirely to trade and make it 2 million and roll it back entirely again to my chocolate company and turn that into 3 million, the final profit is from selling chocolates and nothing else…so I guess it’s not too hard
It does say that actually as per RBI circular 2013-14/265 no. 46
You may also refer to FEMA act 1999 which is available online
In conclusion, I believe What we are attempting to achieve is possible. The resulting entity will have a complex structure. And it’ll be bullet proof and 100% legal. I only have a partial idea at the moment
Feel free to correct me if you find anything erroneous
The basic rule is that from money remitted via LRS, you cannot buy securities on margin. End of story.
That basically rules out F&O. However, if you have a bank account outside India which you created during valid residency there, you can use that money to open a brokerage account in that country that allows you to trade F&O there.
Or you can create a legal entity for example using e-residency in Estonia and use LRS to buy shares in that legal entity which is not on margin i.e. fully paid up. Then use the funds within that legal entity to buy securities on margin.
What you are suggesting would be similar to, say, buying shares of apple which is totally allowed. But am permitted to buy shares in the Estonian entity only if that entity is not in my name right?just like am able to buy apple shares because I had nothing to do with founding the company…apple is a bad example coz iphones are obviously not classified as financial securities
If your idea works, all problems are solved without any hassle
Yeah somewhat. When you form the legal entity you will capitalize it - so while you as an Indian resident owns fully paid up shares, the legal entity is a non-resident entity and it will be outside the juridiction of local Indian regulators hence the margin wont apply to it. It will only apply to you.
That is what even i was suggesting … a Wholly owned company outside india, and you will send the funds for the purpose of acquiring the capital of the foreign entity. This entity will be owned by you and will be a separate legal entity in the host country , so FEMA doesnt apply to the entity.
I think, its very difficult to set up a company for purpose other than trading , generate profits then use it to trade , we will have to find something that can achieved directly.
But you will have to declare to your Authorized dealer while remitting funds the nature of business of foreign entity ( WOS form ) and also share the annual reports of the company to indian authorities .
Please share your findings