Trading derivatives, forex etc in other stock exchanges from India


#1

Hi!

As I said long ago, I was developing an semi automated trading system (low frequency) and now am nearing completion. For trading, S&P E-mini seems like a very good future scrip. But, as we are not allowed to trade overseas, is there a proper legal way to do this. I would like to set a prop shop (even employees in the future) but there are umpteen laws which I can’t understand. Can someone tell me about this in detail. The other posts were not satisfactory to my understanding.

  1. Will a freezone company or singapore company be enough?
  2. My capital is not an issue (think crores).
  3. Will it be a problem if I execute the trades from India?
  4. What happens when I draw out some profits?
  5. Overseas Direct Investment (ODI) has some rules regarding financial service sector, will prop trading come under ‘financial services’?
  6. Can I use ODI to invest upwards of 250k?

Thanks!
Looking forward to the replies :slight_smile:


#2

anybody?

Please post whatever you all know


#3

Got a lead

Residents of India will be permitted to carry out transactions in foreign exchange, foreign security or to own or hold immovable property abroad if the currency, security or property was owned or acquired when he/she was living outside India, or when it was inherited by him/her from someone living outside India.

According to FEMA.
Can we use this loophole?
Also if I have an income in USD (say a house that generates rent) can I use it for futures and forex?
Or what about gift?

I have a NRI cousin in Canada. Can he send me a few thousand dollars and I use that for trading? Probably start a company. :thinking:

Cheers!

link: https://www.taxadvisorindia.in/fema


#4

Yup 99 percent sure its legal.

https://www.rbi.org.in/scripts/FS_FAQs.aspx?Id=69&fn=5

the third column. No restrictions on utilisation in/ outside India.


#5

bump


#6

bump again. No replies?


#7

Hey,

  • So under the LRS, “Remittance from India for margins or margin calls to overseas exchanges / overseas counterparty” is not permitted. So futures & options trading will not be permitted by Indian residents - in case they are remitting money through LRS. Check out Q 2(ii) here.
  • To invest into a US financial services company, you could either do it in the below methods:
    a) Individually upto the LRS route ($250k each) through yourself and your family members maybe, and the remaining bit through your cousin in Canada :slight_smile:
    b) Through an Indian financial services company - regulated by either sebi,rbi,irda. Setting up an AIF might also be worth looking at. (A NOC is required to be taken from each of these Regulaors)
  • Setting up a company in the US for this purpose would be the best. Incorporation of a LLC in state of Delaware is supposedly quite easy with less regular compliances. In case you’re raising outside money for this company - you could check out on incorporating a C-Corp company. You would again have to have some local presence of 6-8 employees in place. (Your cousin from Canada could be of great help with this :slight_smile:)
  • You could also explore setting up an entity in either Cayman Islands or Mauritius. All AIFs end up setting their base there because of the low tax rates and multiple tax treaties that they have in place with other companies. You would probably have to have a few employees (say 6-8 or so) and have a decent operations setup there to take all such benefits. [This paper is super informative on setting up AIFs]
  • On whether the ODI investment can be made through your prop trading desk into a US based entity- It should be fine if it is through a Company or a LLP, and not a partnership.

#8

Thanks for insight. Can you tell on monetary basis how much minimum capital should one possess before looking through above mentioned ways.


#9

Thanks a lot! I will do more research before finalising a decision :slight_smile:
Some people are telling me, as an Indian citizen it is illegal to do so through any loopholes… :thinking:
Thanks anyways :slight_smile:


#10

I have been trading overseas from India for the past two years. It costs lakhs to setup.


#11

Also requires yearly compliance.


#12

how do you do it?


#13

Refer to this thread.
https://tradingqna.com/t/detailed-explanation-on-trading-overseas/55526/6