BCI rules do not permit advertisement or solicitation by advocates or their firms. This website is for information only. See Disclaimer

IFSCA Issues Consultation Paper on Remote Broker-Dealers in IFSC

Featured in

The International Financial Services Centres Authority (IFSCA) has released a consultation paper discussing the introduction of Remote Broker-Dealers in International Financial Services Centers (IFSC).

Current Status of Broker-Dealers

In accordance with clause 8 of the former SEBI (IFSC) Guidelines, Broker-Dealers interested in operating from IFSC were required to establish a dedicated company for providing broking services. As of November 20, 2023, there were 72 registered Broker-Dealers in the IFSC, collectively generating a monthly turnover of approximately USD 64 Billion for October 2023 across both stock exchanges [India International Exchange (IFSC) Ltd and NSE International Exchange (NSE IX)].

A circular issued by IFSCA on June 21, 2023, granted Broker-Dealers permission to offer the Sponsored Access facility to clients. Sponsored Access (SA), a form of Direct Market Access (DMA), allows clients to transmit orders directly to the Exchange trading system, bypassing the need to route orders through the Broker-Dealer’s trading system. The Regstreet Law Advisors has previously written on DMA and SA in IFSC- https://lnkd.in/dN8jd_gz.

As per Regulation 5(1) of the IFSCA (Capital Market Intermediaries) Regulations, 2021, a capital market intermediary seeking registration with the Authority must establish a presence in an IFSC through various permissible forms.

Proposal to Boost Foreign Participation

The Consultation Paper proposes permitting Broker-Dealers to operate remotely from foreign jurisdictions, allowing them to transact on Stock Exchanges without a physical presence in the IFSC. The proposal introduces a sub-category of Broker-Dealers known as Remote Broker-Dealers (RBD).

To operate as an RBD in the IFSC, an entity must obtain a certificate of registration from IFSCA and comply with specified requirements outlined in the consultation paper. Some key requirements include:

a)      The entity must be a resident of a country whose securities market regulator is a participant in the International Organization of Securities Commissions (IOSCO) Multilateral MoU or has a bilateral MoU with IFSCA.

b)     The RBD is exclusively authorized for proprietary trading activities and is prohibited from onboarding clients.

c)      The RBD is permitted to transact only in cash-settled derivative products.

The Consultation Paper, attached herewith, invites readers to share their views with Regstreet Law Advisors at info@regstreetlaw.com

Latest RegPost