Master Direction – Reserve Bank of India (RBI) (Electronic Trading Platforms) Directions, 2025
Please refer to Paragraph 1 of the Statement on Developmental and Regulatory Policies announced as a part of the Bi-monthly Monetary Policy Statement for 2023-24 dated February 08, 2024, on review of the regulatory framework for Electronic Trading Platforms set out in the Electronic Trading Platforms (Reserve Bank) Directions, 2018 dated October 05, 2018.
- The draft Master Direction – Reserve Bank of India (Electronic Trading Platforms) Directions, 2024, was placed on the Bank’s website on April 29, 2024, to invite comments/feedback from all stake holders. Based on the feedback received, the draft Directions have since been finalized and issued herewith.
- These Directions have been issued by the Reserve Bank in exercise of the powers conferred under section 45W of the Reserve Bank of India Act, 1934, and of all the powers enabling it in this behalf.
- These Directions shall be applicable with immediate effect.
Summary of RBI Master Direction – Electronic Trading Platforms (ETPs) Directions, 2025
The Reserve Bank of India (RBI) issued the Master Direction on Electronic Trading Platforms (ETPs) on June 16, 2025, under section 45W of the RBI Act, 1934, superseding the 2018 ETP Directions. These directions regulate entities operating ETPs for transactions in eligible instruments (securities, money market instruments, foreign exchange instruments, derivatives, etc.) and are effective immediately.
Key Points:
Scope and Applicability:
- Applies to entities operating ETPs for eligible instruments, excluding systems operated by scheduled commercial banks or standalone primary dealers where they are the sole quote provider and party to transactions.
- Such exempted systems must still provide required reports/data to RBI or trade repositories.
- RBI may mandate compliance for specific systems in the public interest or for financial system regulation.
Definitions:
- ETP: Electronic system (other than recognized stock exchanges) for trading eligible instruments.
- Eligible Instruments: Securities, money market instruments, forex instruments, derivatives, etc., as specified by RBI.
- ETP Operator: Entity authorized by RBI to operate an ETP.
- Other terms like algorithmic trading, net worth, and resident/non-resident are defined per relevant laws.
Authorization Requirements:
- No entity can operate an ETP without prior RBI authorization.
- Eligibility Criteria:
- General: Must be a company incorporated in India; non-resident shareholding must comply with FEMA, 1999; at least two key managerial personnel must have 3+ years of experience in financial market trading infrastructure.
- Financial: Minimum net worth of ₹5 crore, to be maintained at all times.
- Technological: Robust infrastructure for reliability, scalability, security, and real-time/near real-time trade information dissemination.
- Applications for authorization must be submitted via the PRAVAAH portal with required details (Annex-1).
- RBI may request additional information or third-party assessments and can reject applications or cancel authorization if violations occur or if it’s prejudicial to public interest.
Operating Framework:
- Access and Participation: Transparent membership criteria, due diligence, unique identification (LEI/PAN), documented rules, and fair pre/post-trade information sharing.
- Risk Management: Comprehensive framework to manage risks, ensure fair trading, prevent unauthorized access, and control erroneous transactions. Special provisions for algorithmic trading include testing and monitoring frameworks.
- Surveillance: Systems to ensure fair and orderly trading and monitor market integrity.
- Conflict of Interest: Disclose conflicts involving related parties to RBI.
- Transparency: Fair and non-discriminatory fee structure.
- Outsourcing: Governance and risk management for outsourced operations; compliance with RBI regulations mandatory.
- Business Continuity: Robust Business Continuity Plan (BCP) and disaster recovery arrangements.
- Information Security: Adherence to cyber security norms and annual IT/IS audits by certified auditors.
- Data Management: Ensure data confidentiality, maintain records for 10 years (or longer for investigations), and share data with RBI/authorities if required.
Reporting Requirements:
- Quarterly reports (Annex-2) on platform operations, disruptions, market abuse, and transaction details within 15 days of quarter-end.
- Annual compliance report by April 30 of the following financial year.
- Transaction data reporting to trade repositories as prescribed.
- Immediate reporting of disruptions or market abuse via email.
Termination of Operations:
- ETP operators must seek RBI approval to terminate operations and surrender authorization letters.
Exemptions and RBI Discretion:
- RBI may exempt ETP operators from specific provisions or impose additional conditions in the public interest or for financial system stability.
- Authorization grants are selective to ensure robust market infrastructure and mitigate risks from unproven technology.
Annexes:
- Annex-1: Application form for ETP authorization, including details on legal status, financials, technology, and compliance.
- Annex-2: Quarterly report format covering trading members, disruptions, market abuse, and transaction details (e.g., instrument, dealing mode, turnover, algo trade share).
These directions aim to strengthen the regulatory framework for ETPs, ensuring transparency, security, and market integrity while fostering financial market development.
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