The concept of forex trading is relatively new in India. Ever since citizens discovered the enticing opportunities that this market provides, they have started to direct their attention towards this market. However, the Indian government has put certain restrictions on FX trading in the country to protect its citizens from the regular risks of the market.
The legal status of Forex Trading in India
The Reserve Bank of India has enforced several restrictions on FX activity in the country to save its foreign reserve as well as to protect clients from loss. While it is technically not illegal to trade forex from inside the country, the process becomes a little complex owing to the myriad of restrictions and limitations enforced by regulatory bodies.
- All FX activity in the country is controlled by the Securities and Exchange Board of India (SEBI) and the Reserve Bank of India (RBI).
- The Reserve Bank has made trading with certain currencies illegal to protect the INR from devaluation.
- Under the rules, Indian FX traders can only trade with certain currency pairs that feature the Indian Rupee. Examples: JPY/INR, GBP/INR, EUR/INR and so on.
- The rules have been relaxed in recent years to allow the introduction of three new currency pairs for trading, namely, the EUR/USD, the GBP/USD and the USD/JPY.
- The Foreign Exchange Management Act of 1999 is a set of rules for foreign exchange in the country.
- The SEBI does not enforce certain client protection laws such as negative balance protection or leverage limits like some other regulatory bodies do.
- The Reserve Bank intervenes from time to time to reduce the volatility in the forex market.
- Under the rules, any Indian citizen is barred from sending funds in INR directly for the purpose of forex trading. To get around this many international brokers have introduced local deposit options for their India-based clients to ease the whole process.
Trading FX outside India
A very common question amongst Indian trading circles is “ can an Indian trade forex outside India?” Is it possible?.
The short answer is yes.
- According to the FEMA Act of 1999, a person resident in India can hold, own or transfer foreign currencies, securities and immovable property situated outside India. However, this is only applicable when such currencies are held or owned when the individual is outside of India.
- So if an Indian citizen lives abroad in a foreign country, he/she is free to open an FX brokerage account with any international broker.
- It is advised that they choose a broker which is regulated in the country he or she is residing in. For instance, choose a broker which is regulated by the Financial Conduct Authority or FCA when residing in the UK.
- Most brokers are regulated by one or more of the following international regulatory bodies such as the Financial Conduct Authority (FCA) in the U.K, the European Securities and Markets Authority (ESMA) for the EU, the Securities and Exchange Commission in the U.S., and the Australian Securities and Investments Commission (ASIC) in Australia, just to name a few.
- After signing up with an international broker, an Indian trader can access all the trading pairs that the broker provides. This means that he/she is not limited to INR based pairs in this case.
What is a Forex Regulation?
Since the international forex market is decentralised, the market is more susceptible to fraud in comparison to other financial markets. Foreign exchange regulations have been thus enforced by several independent and governmental supervisory bodies. Depending on the country, these regulatory bodies are responsible for several aspects of the forex market in their own country. These include conducting regular audits, ensuring every broker has the minimum capital requirement, enforcing leverage limits, ensuring segregation of client funds and overall client protection.
Some of the major regulatory bodies in their respective countries include:
- Financial Conduct Authority (FCA) in the U.K.
- The Commodities Futures Trade Commission(CFTC) in the U.S.
- The Securities and Exchange Commission in the U.S.
- Australian Securities & Investments Commission in Australia
- Financial Sector Conduct Authority in South Africa
- Investment Industry Regulatory Organization of Canada
- Cyprus Securities and Exchange Commission
List of some of the best FX brokers in the world
It’s absolutely essential that you pay attention to the regulations before you choose a particular FX broker. Always conduct research into which regulatory bodies the broker falls under and what client protection that broker can provide. With that being said, here is a list of brokers you can check out, all of which are regulated by major regulatory bodies. You can open an account with any one of the brokers to gain access to the global FX market.
Axiory
Axiory is a relatively new broker among those included in this list, being founded in 2011. Headquartered in Belize, it is operated by a group of companies and offers clients access to FX and CFD instruments. Clients are protected by negative balance protection and are compensated up to $20,000 for any losses incurred due to the fault of the broker. Axiory also presents annual reports to the respective authorities and maintains segregated accounts for its clients.
Features:
- Regulated by: International Financial Services Commission(IFSC)(Belize)
- Platforms available: cTrader, Meta Trader 4
- Minimum deposit: $50
Visit Axiory for more information.
BlackBull Markets
Another new broker, BlackBull Markets began operations in 2014, providing reliable financial services coupled with proprietary software. Apart from account options for retail traders, BlackBull markets also provide money managers, professional services for institutional accounts as well as MAM and PAMM accounts. It maintains segregated accounts for its clients with top-tier banks and also offers negative balance protection.
Features:
- Regulated by: Financial Markets Authority(New Zealand)
- Platforms available: MetaTrader 4 and 5, Social trading Myfxbook and ZuluTrade
- Minimum deposit: $200
Visit Blackbull Markets for more information.
FP Markets
FP Markets is headquartered in Sydney Australia and provides ECN technology. This allows clients direct access to the liquidity providers without intervention from any dealer. This is done through Equinix NY4 Data Centers which help execute orders through the best possible price.
Features:
- Regulated by: Australian Securities and Investments Commission
- Platforms available: IRESS, MetaTrader 4 and 5
- Minimum deposit: $100
Visit FP Markets for more information.
GO Markets
Launched back in 2006, GO Markets is headquartered in Australia and is a globally recognised broker having won several accolandes. It offers trading in forex along with CFDs, indices, metals, cryptocurrencies and energies. Additionally, it also offers users copy trading or social trading abilities. To cater to various types of clients, it offers two account types: GO Plus and Standard. The spreads for their Go Plus account start from 0.0 pips and offers a maximum leverage of up to 500:1.
Features:
- Regulated by: Australian Securities and Investments Commission
- Platforms available: MetaTrader 4 and 5, WebTrader
- Minimum deposit: 200 AUD
Visit GO Markets for more information.
BDSwiss
Established in Zurich back in 2012, BDSwiss has a huge customer base across 180 countries numbering almost 1.5 million. It provides worldwide coverage through entities in Seychelles, Cyprus and the U.S. The broker also possesses cross border licenses which provide relief to a lot of traders outside of the EU. BDSwiss offers 4 different account types to choose from InvestPLUS, Raw, VIP and Classic.
Features:
- Regulated by: BaFin, ESMA, CySEC, FSC, NFA, FSA
- Platforms available: MetaTrader 4 and 5
- Minimum deposit: $100
Visit BDSwiss for more information.
Final Thoughts
The above are some of the best forex brokers that you can check out. Indian traders can enjoy the services of international brokers if they are residing outside of the country. However, they should always be careful while selecting brokers. Choosing a highly regulated FX broker will ensure that your funds will be protected from any fraudulent activities.