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RBI plans regulations for market abuse

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MUMBAI: Indias central bank plans to come up with market abuse regulations after some participants were seen to be unduly influencing daily trading over the past one or two years.

“It is proposed to introduce regulations, in line with the best global practices, to prevent abuse in markets regulated by the Reserve Bank,” the central bank said in its monetary policy statement.

The Reserve Bank of India (RBI) has cited a few examples that are aimed at bringing transparency in market transactions.

For instance, the Fixed Income Money Market and Derivatives Association of India (FIMMDA), an industry body, has developed a fair practice code (FPC) for voluntary adoption by banks and other members.

Similarly, the Foreign Exchange Dealers Association of India (FEDAI) has also adopted a global code of conduct for the wholesale forex market.

It sets out principles to “promote a robust, fair, liquid, open and appropriately transparent market, underpinned by high ethical standards.”

The central bank will issue draft regulations by August end this year after due consultations.

Earlier in January last year, the government bond market faced criticism amid allegations of cartelisation against some banks by traders and dealers who accused the lenders of breaking an unwritten covenant.

Although banks had refuted such accusations, saying they were merely acting in their own defence, the bond market rallied and a sudden shortage of sovereign bonds pushed up prices. The matter was resolved after the RBI had intervened.

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