OVERVIEW-

• The International Financial Services Centres Authority (IFSCA) has recently issued a significant circular regarding Remote Trading Participants (RTP) on Stock Exchanges within the International Financial Services Centre (IFSC).

• This circular aims to enhance market participation and liquidity by allowing foreign entities to trade directly on these exchanges without the need for a physical presence or a broker-dealer.

 

WHAT DOES IT SAY?

• IFSC has received representations from market participants, including stock exchanges, asking direct participation by foreign institutions.

• It was proposed that this enabler will boost the number of participants, making the secondary market more active and liquid.

• Foreign firms without a physical presence in IFSC can now trade directly on stock exchanges on a proprietary basis without a Broker-Dealer. The entity is referred to as a Remote Trading Participant (RTP) .

• 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.

CONDITIONS FOR ONBOARDING AS RTP-

To ensure the stability and integrity of the market, entities seeking to become RTP must fulfill following criteria/condition:

• The entity is a resident of a country whose securities market regulator is a signatory the International Organization of Securities Commission’s Multilateral Memorandum of Understanding (IOSCO-MMoU) or a signatory to the bilateral Memorandum of Understanding (MoU) with IFSCA.

• The entity is a body corporate.

• The entity is not a resident of a country identified in the public statement of the Financial Action Task Force (FATF) as –

1. a jurisdiction having a strategic Anti-Money Laundering or Combating the Financial of Terrorism deficiencies to which counter measures apply or
2. a jurisdiction that has not made sufficient progress in addressing the deficiencies or has not committed to an action plan developed with the FATF to address deficiencies.

• The entity shall be permitted to trade only on a proprietary basis and shall not be permitted to onboard clients.

• 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.

• An entity incorporated in India will not qualified to be onboarded by the Stock Exchanges as a RTP.