As is the case in many other countries around the world, which conduct free trade in India with certain rules and guidelines. Forex trading, the buying, and selling of global currency is said to be the largest and most liquid market in the world.
The two currencies involved in a transaction are called currency pairs and, in most countries, often involve trading the USD and other major currencies to capitalize on market activity. The currency of India is the Indian Rupee (INR), with the Reserve Bank of India (RBI) and SEBI being one to monitor market movements and activity in the country. Top 10 Forex Brokers In India SEBI Regulated Are eToro, IC Markets, Angel Broking, FXTM, FBS, Interactive Brokers, IG.com, OctaFX, CMC Markets, and AdmiralMarkets.
Forex trading platform in India
There are several options available for trading Forex in India, which are said to offer competitive amount spreads, research, analytical tools, educational materials, as well as a wide range of investment options and deals. Many high-end brokers offer access to MetaTrader 4 and 5, which have gained great popularity due to their mapping tools and technical indicators. Apart from that, they also have a beginner-friendly Guide for novice traders and various educational and training videos.
How SEBI regulates Forex brokers
SEBI takes its regulatory function quite seriously and is therefore considered one of the most influential authorities in securities regulation worldwide. To achieve this, the regulator ensures that it enforces several guidelines on the best forex brokers for beginners regulated under the Indian regulatory body. One of the ways FX brokerage firms are regulated by Indian regulatory bodies is to ensure that each FX brokerage firm is supervised in the form of regular audits of financial information and trading practices to ensure there are no financial malpractices or discrepancies.
SEBI also requires that forex trading in the country should only be offered if the currency pair involves the Indian rupee (INR). This ensures that only currency pairs are traded with INR including JPY, USD, EUR, and GBP. Compared to other regulatory bodies, the guidelines imposed by SEBI are rather strict and lead to tougher sanctions. Failure to comply with these regulations, for example, can lead to several implications, which include loss of trading licenses, legal turmoil, or even detention.
A Brief History of SEBI
SEBI is a financial regulatory body in India that regulates the trading of currency derivatives among other securities exchange markets. It was formed in 1992 under the Securities and Exchange Board of India Act of 1992 as the main regulator for all stock exchanges in India.
SEBI regulates all forex Brokerage companies in India irrespective of whether they are onshore or foreign brokerage firms. During its founding in 1992, the company was just a supervisory authority with no legal force but this was later changed. Amendments to the SEBI act were made in 1995 in which councils were given statutory powers, allowing them to put in place enforcement mechanisms. It was also this year that the board was given the power to regulate capital markets following a government resolution.
Functions and Roles of SEBI
Several functions have been mandated to SEBI as the main securities regulator in India, These functions include:
Development function
The Indian Securities and Exchange Board has several development functions aimed at enhancing the trading of securities, both forex and other securities traded in India. For example, one of the main development functions allocated to SEBI is to train market participants and Brokers in the Indian securities market.
Another development function carried out by SEBI is to put in place flexible policies and approaches aimed at improving the overall securities exchange market. SEBI, for example, allows trading of forex derivatives and other securities over the internet. It performs this function by ensuring that all brokers who perform these functions are registered and have the appropriate licenses.
Protective function
The SEBI protection function is one of the important roles and functions that the board has carried out. An example of this function is SEBI’s role in ensuring that there is no price fraud. Price rigging in forex is an illegal act in which brokers or other intermediaries work together to fix the price of a commodity, usually inflating it to the detriment of consumers. Price cheating is frowned upon as it is a way to deceive forex investors. Failure to prevent price fraud may also prevent investors from participating in the Forex market.
Another protective function of SEBI, like other Forex regulatory bodies, is to eliminate all forms of insider trading. Insider trading is one of the common malpractices in securities trading. Insider trading is the use of information or material that is not in the public domain, by insiders, in an attempt to make a profit. An insider in a company is considered to be an individual who has non-public access to information about a particular company or a person who has more than 10% share ownership in the company. Over the past, SEBI has been known to have a firm stand against insider trading and to take strong action if individuals or brokers use non-public information to profit illegally. SEBI also ensures that there are no fraudulent or unfair FX trading practices.
Setting function
The SEBI regulatory function may be the primary function allocated to the board. One of the main functions of the board is to make rules and regulations for all market participants and forex brokers. This ensures that there is a comprehensive code of conduct for forex brokers to follow and also ensures that the code of conduct or ethics is strictly adhered to. SEBI also ensures that the Forex Broker is registered and follows the specified trading rules.
The board regulates several intermediaries, which include trustees, stockbrokers, stock transfer agents, merchant bankers, and even sub-brokers. Mutual fund licensing and regulation is also an integral part of SEBI’s mandate in regulating the securities market in India. The board ensures the takeover of the company is sanctioned and they comply with all the rules.