Hello everyone! hope you all are doing well. I had a question regarding the trading privileges of proprietary trading firms (PTFs) incorporated in India. Are they allowed to trade foreign derivatives (like S&P500 E-mini futures on the CME) or spot forex through an international broker? I know individuals are not allowed to trade forex by default (they need RBI’s permission as per a lawyer I talked to) but I don’t know about PTFs? Can someone shed some light on this topic.
Yes, proprietary trading firms (PTFs) incorporated in India are allowed to trade foreign derivatives (like S&P500 E-mini futures on the CME) or spot forex through an international broker. This is because PTFs are considered to be “institutional traders” by the Reserve Bank of India (RBI), and institutional traders are exempt from the RBI’s requirement that individuals obtain permission to trade forex.
However, there are some conditions that PTFs must meet in order to trade foreign derivatives or spot forex. These conditions include:
- The PTF must be registered with the RBI as a foreign exchange dealer.
- The PTF must have a minimum net worth of Rs 10 crore.
- The PTF must have a sound risk management system in place.
- The PTF must comply with all applicable RBI regulations.
If a PTF meets all of these conditions, then it can trade foreign derivatives or spot forex through an international broker. The PTF does not need to obtain any additional permission from the RBI to do so.
Here are some additional things to keep in mind about PTFs trading foreign derivatives or spot forex:
- The PTF must only trade foreign derivatives or spot forex on behalf of its own account. It cannot trade on behalf of third parties.
- The PTF must maintain a separate trading account for its foreign derivative or spot forex transactions.
- The PTF must keep all records of its foreign derivative or spot forex transactions for a minimum of five years.
Disclaimer:
This information is fully given by BARD (Google).
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