So at the moment, for a foreign individual to trade stocks in an Indian market is extremely difficult. They would essentially be treated as an FII. Would it make more sense to allow them entry into the Indian market with lower burden of proof, perhaps similar to resident retail investors?
American markets are a goto for individual investors around the world. Should India try to position itself in a similar manner? The Gift city based exchanges can really help with this and we could attract listing of more DRs from other smaller countries where trading for foreign investors is very difficult.
Indians don’t get to trade foreign markets either. So there is that.
Would be pretty shit if we get competition from outside without being able to trade other markets.
You can trade in other markets as long as you are okay with FOREX stuff.
As for the main point, Foreign Indi investors should not be allowed as on par with domestic investors - specially when you are earning in stronger currency and using it for weaker one. If you want, setup a domestic firm and trade via that or some other process where you are treated as domestic.
Such individuals in the Indian markets should not be treated as Indian personnel - if you want the service, come to the country.
If you want higher education - you do move countries for the service. Same applies here too. If you want it, come as get it as one of us.
We cannot trade with leverage and any instrument that has leverage is banned. I think we cannot short stocks either ( not sure).
So we can only invest.
Has been discussed plenty of times. We cant use Rs savings to trade outside.
Dunno, same way you can ask why we cant trade outside.
Likely answer is that people largely lose and Rs is a weak currency, so RBI doesn’t want outflow. Its perhaps more likely that professionals will target a country like India for trading against aam aadmi. Dunno if thats the reasoning, i am just guessing.
This is a restriction by the Indian government. US government doesn’t care if you short or leverage or short with leverage.
Letting other people trade in India would actually help the rupee since it would require foreign investors to buy and hold the rupee. Every investment in India by default is an investment in rupee.
Whats the point ? Both to and fro restrictions are Indian restrictions
ok, so you mean to say RBI doesn’t know whats it doing ?
Trading is not investing, money doesn’t have to stay. Even if it stays, overall you will have transfer from Indian amateurs to foreign professionals ( most American amateurs for instance will likely stick to US instruments)
Anyway, all of this is my guess. I would love to be able to trade outside too, but its not allowed and ill have to leave country to do that which isn’t easy with Indian savings. That’s how it is.
This is happening anyway. FIIs are allowed but Foreign Individuals with Robinhood or Webull aren’t.
It probably isn’t even up to the RBI to allow this. It’s most likely a FEMA based restriction. A law which has not aged well.
To your point about Indians not being allowed to trade in derivatives abroad, how about giving access to just the stock and mutual fund market? Something akin to the access NRIs have right now? Every other major economy has opened up its capital account to accept foreign investment. Even china now lets you buy stocks with the Hong Kong Shanghai stock bridge.
India is severely lacking in this department. Foreign capital needs to come into this country to balance out what is leaving. Right now the way we go about it is simply restricting what can leave.
yes, they got caught. I think intent was to allow hedging, but through intraday they found a workaround. Correct me if i am wrong but it think FIIs are not allowed to trade without holding underlying positions. If they are allowed, then i dont know how the rules make sense.
FEMA is from RBI i think.
ok, did not know even investing is not allowed to foreigners, NRIs are allowed. No idea whats the reasoning behind it as we are allowed to invest, but even that is being severely restricted now. MF has basically stopped and with stocks you have to pay a tax at the time of investment.
My guess is that RBI has a reason for what they are doing. Flight of capital is also a severe risk that can cause a lot of damage in short time.
But anyway i am not an economist. And this discussion wont change anything. Again, i would love the option to trade outside.
STT is a very high cost which hinders trading and liquidity. Compensated perhaps by high returns in India which will reduce if outside capital is allowed to trade actively in India. So from my selfish pov, either both or None is what i prefer.
FEMA stands for Foreign Exchange Management Act. RBI has a lot of power under this act and does fill in the gaps but anything in the act explicitly stated must be changed by the parliament.
I think it is a bit more complex than that. You don’t always need the underlying. Spreads like Icon Condors or Butterflies are legitimate bets which provide liquidity to the market while allowing exposure to more meta things like volatility.
What happened with Jane Street seems like a classic pump and dump with derivatives sprinkled in for leverage. Pump Stocks, Buy derivates, Dump Stocks. There should’ve been proactive monitoring. It is the simple failure of SEBI and NSE to not be able to detect this on the fly.
The issue is markets follow game theory. Now that Jane Street is gone, the liquidity is even lower making it much easier for someone else to use the exact same method. This may be a domestic or foreign player. As long as you can hide the connection between the entity buy/selling and the entity trading the derivates, there is very little that can be done to stop this.
From what i understood, they need good liquidity in options where they make money and need to enter and exit without much movement, and less liquidity in underlying which creates the movement. As long as options follow movement in underlying or if that can influence the expiry price.
Anyway, not an expert. SEBI/RBI etc can handle it. If its not sustainable they will add more and more restrictions on the options market unfortunately. Hopefully fine is increased to add actual deterrence. 10% of profits seems like a joke.
Such unprecedented times, with multiple factors at all-time-highs in various aspects of the financial system, are sure to give even the most seasoned investors vertigo.
