Forex trading involves converting the currency of a certain country into another. It is a $5 trillion market in terms of daily volumes, and can be accessed across the world at all times.Through forex trading in India has legal sanction, there are strict rules that govern currency trading in India.
Before delving into the legalities, it helps to understand that currency futures (where you can exchange currency at a specified price on the date of purchase) and currency options are made available Currency options are much like stock options where an individual has the right to sell or buy a pair at a pre-fixed price but no obligation to do so; ie, the holder of the contract can exercise the option of either executing the contract or not.
Forex trading in India is regulated by the capital markets regulator SEBI which makes sure that firms follow the Foreign Exchange Management Act, 1999. The country’s central bank, the RBI, regulates forex transactions. Currency trading in India is permitted in pairs alongside the INR: the US Dollar, Japanese Yen, British Pound and Euro. Cross currency pairs are allowed between EUR/USD; USD/JPY and GBP/USD.
Currency trading on Contract for Differences or CFD platforms is illegal in India. A CFD is where an investor gets into a contract with a broker who purchases the asset for the investor, and depending on the difference between price at opening and closing, the investor either profits or loses. Similarly binary trading is also banned as it involves betting on the outcome of the price movement of a pair in a specific period
Legal forex trading in India would mean that the broker is SEBI-registered. Also, anyone interested in online forex trading in India would need to ensure that the broker is registered with SEBI. You can trade in forex on recognised stock exchanges such as the Bombay Stock Exchange (BSE), National Stock Exchange (NSE) or the Metropolitan Stock Exchange.
Any forex trading on unauthorised trading platforms or outside of the purview of the recognised exchangeš is a penal offence under FEMA 1999. Exchanging currency to fofeign pairs not permitted is also a punishable offence. If the person has traded in an illegal manner, the individual will be fined up to Rs 10,000 for the day in which they have traded. For more number of days, apart from an initial Rs 10,000 followed by the same amount for each day of violation may be levied. As per the Act (under Section 13 (1C), a forex trader who has indulged in illegal activity may also be jailed for up to five years.
Forex and currency trading in India is legal but failure to adhere to authorised brokers or permitted currency pairs is a penal offence under FEMA. If you are interested in online forex trading in order to make your portfolio a diverse one. make sure you check the broker’s credentials. Do your research and opt for an authorised broker who has SEBI registration.
Before that, take the first step and open a trading account online so you are guided through the world of forex trading in India by personalised experts.
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