Last update: 12 October 2020
6 min read

The Best Indian SEBI Regulated Forex Brokers

If you need to find the best SEBI regulated brokers, you’ve come to the right place. This page is full of expert information on what SEBI is, what they do, and a few tips to help you find the best brokers regulated by SEBI.

India seems to have its own take on the idea of trading. Forex trading, as many of you will understand it, is actually illegal. That said, there are a number of offshore online brokers that allow Indian residents to trade foreign currencies online.

However, trading in currency derivatives is allowed. It can only be done through a stock exchange recognized under the Securities Contract (Regulation) Act 1956. There are a number of regulators for the financial industry in India, but those of you considering trading will be most interested in SEBI.

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How SEBI keeps you safe

SEBI has three functions: developmental, protective, and regulatory. Here’s a little more about each of them:

Protective functions

  • Checking for price rigging – this is prohibited because it can cheat and defraud investors
  • Prohibits insider trading – SEBI has been known to take strict action on insider trading
  • Prohibits fraudulent and unfair trade practices

Developmental functions

  • Trains intermediaries of the securities market
  • Adopts a flexible and adoptable approach, for example, by allowing internet trading through registered stock brokers, and by making underwriting optional

Regulatory functions

  • Drawing up rules and regulations. And a code of conduct, for intermediaries to follow
  • Bringing intermediaries under regulatory bounds and making private placement more restrictive
  • Registering and regulating SEBI stockbrokers, merchant bankers, sub-brokers, trustees, share transfer agents and anyone else associated with stock exchanges
  • Registering and regulating the work of mutual funds
  • Regulating company takeovers
  • Making inquiries and auditing stock exchange

What is SEBI?

Securities and Exchange Board of India logoThe regulatory body responsible for forex trading is SEBI, which stands for the Securities and Exchange Board of India. Established under the SEBI Act 1992, it is the principal regulator for stock exchanges in India.

What does SEBI do?

It’s SEBI’s role to keep investors like you safe while trading with Indian brokers. The functions of SEBI include:

  • Protecting investor interests and ensuring the safety of their investments
  • Preventing malpractices and fraudulent activities by balancing self-regulation of business and statutory requirements
  • Promoting and regulating the securities market in India
  • Developing a code of conduct for intermediaries such as SEBI brokers, underwriters

Forex brokers in India are governed by SEBI regulations, whether domestic or foreign.

When SEBI was originally established, it had no statutory power. But in 1995, following an amendment to the Securities and Exchange Board of India Act 1992, it was given additional statutory power. In the same year, it was also constituted as the regulator of capital markets under a government resolution.

SEBI responds to the needs of three groups: the issuers of securities, the investors, and market intermediaries. And it has three functions: quasi-legislative, quasi-judicial and quasi-executive. In its executive capacity, it conducts investigations and enforcement action. In its judicial capacity, it passes rulings and orders. Meanwhile, its legislative powers allow it to draft regulations. All three roles performed by one body makes SEBI a very powerful organization.

What guidelines does SEBI follow?

Now that you have a better understanding of the legality of trading, we’ll explain the rules and processes which govern this type of trade.

A number of organizations have been involved in setting up the framework for derivative trading, incuding the Royal Bank of India and SEBI. However, the legal guidelines are provided by the Foreign Exchange Management Act.

There are three stock exchanges through which you can trade. These are the National Stock Exchange (NSE), MCX-SX and the United Stock Exchange (USE). In the past, trading could only take place for the INR/USD currency pair. But GBP, EURO, and the Japanese Yen (JPY) have all since been added. And the RBI has relaxed the rules even further to allow EUR/USD, GBP/USD, and USD/JPY.

Currency derivatives are traded on margin, which means you have to deposit an initial margin with the exchange through your chosen intermediary. The contracts are always settled in cash and in Indian rupees. It is possible for futures to have a cycle ranging from one to 12 months. Lots sizes for futures are 1,000 per unit – unless it is for the Japanese Yen/Indian Rupee pair, in which case it is 100,000 units.

Checking for SEBI regulation

Once you’ve decided you’re ready to use one of the best SEBI regulated brokers in India, you’ll need to make sure they’re properly registered and have a valid license. A quick and easy way to do this is to just look at the broker’s website. Usually, the footer will contain all the relevant licensing information.

However, sometimes unregulated brokers lie about having a license from regulators like SEBI. So, the best thing to do is check out SEBI’s website directly. That way you can find a full list of all verified and licensed brokers.

SEBI uses SCORES to handle customer complaints

SCORES (SEBI Complaints Redress System) is a web-based centralized grievance redressal system which has been developed by SEBI for registering and tracking complaints made from investors about SEBI registered entities.

The advice given is always to address any complaints with the company in question. Should you be unable to reach a mutually satisfactory resolution, you will then be able to lodge your complaint online with SEBI and follow its status.

SEBI is able to help investors with complaints relating to the issue and transfer of securities and non-payment of dividend by SEBI list companies. It is also able to handle complaints against various intermediaries, including all the best SEBI regulated brokers. When the complaints are received they are examined, and the appropriate action is taken to redress the issue.  SEBI is unable to act as a judge or an arbitrator and force the company to resolve the complaint. It will, however, continue to monitor the situation, send reminders, hold meetings, and issue pre-enforcement letters.

There are securities laws and other laws dealing with legal rights and remedies if an investor has suffered a wrongdoing. The ultimate course of action – if SEBI is unable to get the situation resolved – is to seek resolution through the courts, consumer courts, or arbitration. We should stress, however, these options can be very time-consuming and very costly. As such, they should always be used as a last resort.

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