RBI warning against forex trading sites

RBI said those transacting for purposes other than those permitted under the Foreign Exchange Management Act (FEMA) or electronic trading platforms (ETPs) authorized by the RBI may face penal action under the Foreign Exchange Act.

OctaFX, the official trading sponsor of the Indian Premier League (IPL) team Delhi Capitals, is one of the many unofficial digital platforms under the RBI scanner to offer forex trading.

The warning comes after an inter-departmental group report in November that showed the RBI has been issued with the public on online trading such as OctaFX, Olymp Trade, I-Forex, FBS, Expert Option, Binomo.com, AVA Trade, IQ Option. Questions are received continuously from Alpari, Forex.com and TP Global Forex, which provide forex trading facilities.

The report states that some of these platforms promise high returns, bonuses and rewards.

“None of these trading platforms are authorized by RBI. Nor are they recognized stock exchanges registered with SEBI (Securities and Exchange Board of India). As such, the services offered by these platforms are unauthorized,” the report said.

The Mint has reviewed parts of the report.

Spokesmen for OctaFX and Olymp Trade did not immediately respond to requests for comment.

RBI observed that these platforms offered a derivative product called Contracts for Differences (CFDs) during the lockdown period. A CFD is an arrangement made in financial derivatives trading where the difference in settlement between the open and closed trade prices is cash-settled.

“These aspects have been highlighted in advisories issued by RBI in the past, and also to Authorized Dealer Category-I (AD Cat-I) banks with regard to remittances made for such transactions and accounts opened for such purposes. Despite this, the available anecdotal evidence suggests a significant prevalence of such unauthorized services being provided to residents,” the report said.

In a press release, the RBI said that it has taken note of misleading advertisements of unauthorized ETPs (electronic trading platforms) providing forex trading facilities to Indian residents, including social media platforms, search engines, over-the-top platforms and gaming apps. Have given.

Some of these platforms also claim to be regulated by foreign regulators and global awardees, it said.

RBI also noted that these apps use features like lotteries and casino games to lure users. For example, these portals organize free demos and online webinars citing ‘success’ stories. “Reportedly, there are also instances of various schemes such as competitions and tournaments levying low fees or registration fees to lure customers.”

Further, the report mentions that these platforms have developed alternative remittance routes after the RBI banned the use of international debit and credit cards and merchant category codes for foreign exchange trading abroad.

For example, platforms like OctaFX, IQ Option, Olymp Trade, Exness, XM, Cabana Capital, FXTM, FBC, etc. offer payment options in rupees using domestic payment systems. Some of them also accept payments through international wallets such as Skrill, Paypal, and Neteller, which are funded by the resident customer using a debit or credit card. In other cases, these platforms accept payments using bitcoin and other cryptocurrencies to avoid any money trail.

“It is also clarified that remittances for margin to foreign exchanges/foreign counterparts are not permitted under the Liberalized Remittance Scheme (LRS) framed under FEMA,” RBI said in a press release.