RBI sets up foreign exchange trading platform for retail participants

The trading platform, which has been developed by the Clearing Corporation of India (CCIL), is being tested by users. The platform will be available to users for transactions from early August 2019, RBI said.

“By unifying the existing fragmented market microstructure, this platform would provide transparency of pricing and promote competition among market-makers leading to better pricing for all customers, regardless of order size,” RBI stated. 

RBI had, in October 2017, issued a discussion paper proposing to set up a foreign exchange trading platform for retail participants that would provide customers with access to an electronic trading platform through an internet-based application on which they can purchase/sell foreign currency at market clearing prices. 

The circular on operational guidelines for the platform shall be issued by the end of June 2019, RBI said.

RBI has also proposed to rationalise existing regulations covering different money market products with a view to improve transparency and safety of money markets. It would also bring consistency across products in terms of issuers, investors and other participants, RBI said, adding that a draft direction on money market will be issued for public feedback by the end of July 2019.

The Reserve Bank has issued regulations over time covering different money market products – call money, repo, commercial paper, certificates of deposit and other debt instruments with original maturity less than one year, etc. 

In order to increase retail participation in the government security market, RBI has decided to also allow the specified stock exchanges to act as aggregators/facilitators to aggregate the bids of their stockbrokers/other retail participants and submit a single consolidated bid under the non-competitive segment of the primary auctions of State Development Loans (SDLs). 

RBI said the measure will be implemented in consultation with the respective state governments.

Meanwhile, RBI has decided to constitute an Internal Working Group to review comprehensively the existing liquidity management framework and suggest measures, among others, to:

·        Simplify the current liquidity management framework; and 

·        Clearly communicate the objectives, quantitative measures and toolkit of liquidity management by the RBI.

The Group is expected to submit its report by mid-July 2019.

The Reserve Bank's liquidity management framework was last reviewed in 2014. While on the whole the current liquidity management framework has worked well, RBI noted that it has also become somewhat complex. An assessment of liquidity position by different market participants has varied markedly and is not always in sync with the actual systemic liquidity position in the economy, it pointed out.