RBI puts out alert list of illegal forex trading sites

MUMBAI: The Reserve bank of India (RBI) on Wednesday put out an alert list of entities involved in forex transactions on unauthorized electronic trading platforms. OctaFX, Olymp Trade, I-Forex, FBS, Expert Option, Binomo, AVA Trade, IQ Option, Alpari, Forex.com and TP Global Forex are among the 34 names on the list.

OctaFX is the official trading sponsor of Indian Premier League (IPL) team Delhi Capitals.

In February this year, RBI had warned people against trading forex on unauthorized platforms following growing reports of people falling prey to such entities. RBI had said entities undertaking transactions for purposes other than those permitted under the Foreign Exchange Management Act (FEMA) or on electronic trading platforms (ETPs) not authorized by the RBI can face penal action under the Foreign Exchange Act.

While the regulator did not name any of these entities at that time, it received several references seeking clarification on the authorisation of these entities which has now forced RBI to come out with an alert list. The entities in the alert list are neither authorised to deal in forex under the Foreign Exchange Management Act, 1999 (FEMA) nor authorised to operate electronic trading platforms for forex transactions.

“The RBI reiterates that resident persons can undertake forex transactions only with authorised persons and for permitted purposes, in terms of the FEMA. While permitted forex transactions can be executed electronically, they should be undertaken only on ETPs authorised for the purpose by the RBI or on recognised stock exchanges viz., National Stock Exchange of India Ltd., BSE Ltd. and Metropolitan Stock Exchange of India Ltd,” it said

“Resident persons undertaking forex transactions for purposes other than those permitted under the FEMA or on ETPs not authorised by the RBI shall render themselves liable for legal action under the FEMA,” it added.

According to a 4 February Mint report, RBI had noticed that these platforms offered a derivative product called contracts for differences (CFD) during the lockdown period. CFD is an arrangement made in financial derivatives trading where the differences in the settlement between the open and closing trade prices are cash-settled.

RBI has also cautioned against misleading advertisements of unauthorised ETPs (electronic trading platforms) offering forex trading facilities to Indian residents, including on social media platforms, search engines, over-the-top platforms and gaming apps. Some of these platforms also claim to be regulated by overseas regulators and recipients of global awards, it had added.