On Wednesday, the Reserve Bank of India (RBI) released a list of organizations engaged in foreign exchange transactions on unlicensed electronic trading platforms. The 34 names on the list include OctaFX, Olymp Trade, I-Forex, FBS, Expert Option, Binomo, AVA Trade, IQ Option, Alpari, Forex.com, and TP Global Forex.
OctaFX sponsors the Delhi Capitals of the Indian Premier League (IPL).
Following an increase in reports of people becoming victims of such organizations, RBI issued a warning against trading forex on unlicensed platforms in February of this year.
According to the RBI, companies engaging in transactions on electronic trading platforms (ETPs) without authorization or for purposes not covered by the Foreign Exchange Management Act (FEMA) may be subject to penalties under the Foreign Exchange Act.
The regulator did not specifically name any of these organizations at the time. Still, after receiving numerous requests for clarification regarding the authorization of these organizations, RBI was compelled to release an alert list. The organizations on the alert list are neither authorized to conduct foreign exchange business following the Foreign Exchange Management Act of 1999 (FEMA) nor to run electronic trading platforms for such business.
“The RBI reiterates that resident persons can undertake forex transactions only with authorized 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 authorized for the purpose by the RBI or on recognized 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 authorized by the RBI shall render themselves liable for legal action under the FEMA,” it added.
RBI had noted that these platforms provided a derivative product called contracts for differences (CFD) during the lockdown period. A CFD is a financial derivatives trading arrangement in which the price differences between the open and closing trades are settled in cash.