Foreign brokers allowed to operate remotely at Gift IFSC

The International Financial Services Centres Authority has allowed remote trading by foreign stock broking firms on Gift IFSC exchanges.

Such firms will be allowed to trade directly on the stock exchanges on a proprietary basis, without a broker-dealer even if they do not have a physical presence at Gift IFSC in the form of a physical office or staff. Such entities will be referred to as Remote Trading Participants, or RTPs. At present, countries such as Singapore, Japan, Israel and the US allow remote membership of brokers.

“This move is a game-changer,” said V Balasubramaniam, Managing Director & CEO, NSE IX (NSE International Exchange). “This will pave the way for us to become a truly international exchange as global brokers can now connect without requiring to physically relocate to Gift IFSC. All they have to do is find a local clearing member who will clear trades for them.”

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Both trading and liquidity on IFSC exchanges is expected to get a fillip. A number of global algo firms and high frequency traders including Hudson River Trading, DRW, Citadel Trading and IMC are expected to take advantage of this leeway.

“This move heralds a significant stride towards bolstering global engagement and liquidity within India’s IFSC landscape and signals a progressive shift towards fostering an easily accessible trading environment. It reinforces India’s stature as a preferred destination for international investors,” said Jaiman Patel, Partner, EY India.

Entities from 20 stock exchanges from 13 countries including the US, UK, Canada, Singapore and Taiwan are allowed to be part of this. Interestingly, firms from Hong Kong, China and British Overseas Territories are not eligible for remote membership.

The recognised bourses will have the operational flexibility to specify the net-worth criteria, security deposit, application fee, annual fee and any other additional conditions for onboarding a RTP.

The broking entity has to be a body corporate and should not be a resident of a country identified in the public statement of the Financial Action Task Force.

Only proprietary trades and cash-settled derivatives will be allowed initially. Indian resident entities do not qualify for this. The entity shall be required to enter into an agreement with an IFSCA registered Clearing Member for clearing and settlement of its transactions executed on the stock exchanges.

“IFSCA is in receipt of representations from market participants including stock exchanges, requesting direct participation by foreign institutions on the stock exchanges. It was suggested that this enabler is likely to increase the number of participants and make the secondary market more vibrant and liquid. Accordingly, it has been decided to permit foreign entities, not having a physical presence in IFSC, to trade directly,” IFSCA said in a note on Wednesday.

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