The IFSCA Official has released a consultation paper proposing a structured framework to allow and regulate OTC derivatives based on securities listed on IFSC exchanges or regulated foreign stock exchanges. Currently, OTC contracts on IFSC-listed securities are not permitted. The ๐๐ซ๐๐๐ญ ๐๐ ๐๐๐ (๐๐๐ฉ๐จ๐ซ๐ญ๐ข๐ง๐ ๐๐ง๐ ๐๐ฅ๐๐๐ซ๐ข๐ง๐ ๐จ๐ ๐๐๐ ๐๐๐ซ๐ข๐ฏ๐๐ญ๐ข๐ฏ๐๐ฌ ๐๐จ๐ง๐ญ๐ซ๐๐๐ญ๐ฌ) ๐๐ฎ๐ข๐๐๐ฅ๐ข๐ง๐๐ฌ, 2025 aim to fill this regulatory gap and support market demand for a robust OTC segment alongside exchange-traded derivatives. The proposed Guidelines will apply only to OTC derivative contracts where the underlying assets are equity or bonds listed on a recognized IFSC exchange or a regulated foreign exchange. The key proposals are:
๐๐๐ซ๐ฆ๐ข๐ญ๐ญ๐๐ ๐๐ง๐๐๐ซ๐ฅ๐ฒ๐ข๐ง๐ : OTC derivatives such as forwards and total return swaps may be issued on:
a. Equities and bonds listed on IFSC or regulated foreign exchanges
b. Index, equity, and bond derivatives listed on regulated foreign exchanges.
๐๐ฅ๐ข๐ ๐ข๐๐ฅ๐ ๐๐ฌ๐ฌ๐ฎ๐๐ซ๐ฌ: Initially limited to IFSCA-registered entities, including:
a. IFSC Banking Units (IBUs)
b. Broker-dealers c. Others as permitted by IFSCA
๐๐จ๐ง๐ญ๐ซ๐๐๐ญ ๐๐๐ฅ๐ข๐๐ข๐ญ๐ฒ: At least one party must be an eligible issuer, and the contract must be booked within IFSC.
๐๐ฅ๐๐๐ซ๐ข๐ง๐ : All contracts must be cleared through a recognized IFSC Clearing Corporation within one business day. Bilateral clearing is not permitted.
๐๐๐ฉ๐จ๐ซ๐ญ๐ข๐ง๐ : Issuers must report trades on the same day to an IFSCA-approved Trade Repository. SEBI-registered FPIs must also report relevant trades to Securities and Exchange Board of India (SEBI).
This framework (available at https://lnkd.in/dBBxjXUe) marks a major development in establishing a regulated OTC derivatives market at GIFT IFSC, aligning it with global standards and improving its attractiveness as an international financial hub.
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