India Forex trading research
Let's get this straight! I am not a legal expert, hence my answers in this short commentary do not constitute as legal advice. Neither of these findings serves as an academic reference. My sole purpose with this research is to understand whether Forex trading is illegal in India.
Thus, this short research is based on a number of short talks with local experts. Additionally, I have read multiple rulings, the government regulation on ETF trading and Futures trading to find out whether or not Forex Trading is legal in India.
Is Forex trading allowed in India?
Yes, Forex trading is legal in India. In fact, Forex has become a daily routine of many Indian lives. Securities and Exchange Board of India (SEBI) is the body responsible for the Forex trading industry. SEBI regulates all the forex brokers in India regardless of whether they are onshore or offshore brokerage firms. Thus Forex trading is legal in India and you can feel safe with SEBI regulated Forex brokers.
But if we are asking about retail forex trading in India, the answer is there are limitations.
You can trade Forex in India with Indian Exchanges (NSE, BSE, MCX-SX) which offers Forex Instruments. However, Indian Exchanges currently offer USDINR, GBPINR, JPYINR and EURINR pairs for trading purposes.
Trading non-INR Forex pairs is illegal in India under the FEMA act.
Want to trade with a Realiable broker? Open a free account with AtoZ Markets approved forex brokers:
How can I trade Forex in India?
Many international Forex brokers in India allow currency trading in India. Additionally, some of these brokers even try to have training academies in big Indian cities. However, if you are an Indian resident and wish to trade Forex, you cannot trade all the trading instruments by law.
It is true that currency trading in India is decentralized. Theoretically, you can freely buy one currency and sell another one to take advantage of the price movements. However, there are countries seeing this decentralized market as a sovereignty threat. Thus, due to sovereignty issues the Indian government has limited Forex trading in India.
Foreign exchange rules in India used to be even tougher in India a few years back. Now, RBI has slightly eased Forex trading rules. Since India is a net service exporting country, the country needs to ease Forex rules even further. But it is unlikely that we will have completely open financial markets anytime soon.
“Writing laws is easy, but governing is difficult.”
― Leo Tolstoy
So, the government has not forbidden Indians to trade Forex. They have limited trading for Indian residents to only trade currency pairs bench-marked against INR (Indian Rupee). As an Indian resident, as long as you are trading through an Indian Brokerage, which allows access to Indian Exchanges such as the NSE, BSE, MCX-SX, and providing access to currency derivatives is entirely legal. The following is the list of Indian INR Forex pairs:
But, the Reserve Bank of India on the 10th of December 2015 allowed exchanges to offer cross-currency futures contracts and exchange-traded currency options in three more currency pairs. The RBI allowed exchanges to offer cross-currency futures contracts. The exchange-traded currency options in the pairs of EUR-USD, GBP-USD, and USD-JPY with immediate effect.
Want to trade with a regulated broker? Open a live account with AtoZ Markets approved forex brokers:
Indian Forex Reserves
So, why is India limiting Forex trading?
So, let's study the logic behind the Reserve Bank of India (RBI). When you trade EURUSD with "non-Indian" traders/brokers, if and when you lose you would buy USD from RBI. This results in an increase in the current account deficit (lack of foreign currency reserve). Essentially speaking, RBI is artificially claiming to keep Indian Forex Reserves as their main priority.
India's total foreign exchange reserves stand at around $442 billion as of the 1st of November 2019.
How to trade Forex legally in India?
Assuming that you want to trade EURUSD, USDJPY or EURJPY or other possible combinations, but your local exchange does not offer such an instrument.
In this case, you may trade USDINR and EURINR that the INR gets eliminated and technically end up trading USD vs EUR. There is however a big disadvantage of trading Forex via crosses this way and it is the increase in transaction costs and there is often lack of liquidity.
Meanwhile, you should note that CFD platforms are not legal in India. Thus from a broader perspective trading on leverage is not allowed in India. You as a trader should know your limits and act accordingly. So far, the government has not really cracked down on retail traders however there have been major crackdowns on a number of brokers illegally operating in India.
There has been regulated and unregulated brokers trying to establish their branches in India under different names, from education academies to training schools or consulting agencies. These entities often get away with their activities from a few months to a few years until someone gets to report them to the local authorities. Such as the xDirect Indian office raid earlier in 2016.
Top 3 brokers in India
There is no restriction for Indian traders in choosing forex brokers. There are many regulated and international brokers that provide services in India. The following section will see the top 3 Forex brokers for India traders.
eToro is the world's leading social trading network launched in 2006 by brothers Ronen and Yoni Assia and their partner David Ring, under the name RetailFX. In 2010, eToro became the first company to introduce the concept of social trading, making a huge impact on what online trading in the financial markets is today.
The platform will be interesting for both beginners and experienced Indian traders. The platform's simplicity and transparency, allowing beginners to copy the strategies of the most experienced and successful users, has made eToro's concept of social trading very popular with novice traders.
If you are just starting out on your journey of exploring the market and do not yet have tangible experience, eToro is definitely for you.
Markets.com is a global Forex and CFD trading broker that was founded in 2010. Markets.com is regulated by popular regulatory bodies that include CySEC, FSCA, AISC and FCA. It offers over 8,200 trading assets and over 8,000 markets to trade, which also facilitates advanced yet easy-to-use trading platforms. Makets.com provides a variety of options for trading Forex, CFDs, Stocks, Commodities, Cryptocurrencies, Indices and ETFs. The brand is one of the best forex trading platforms in 2017, which was rated by the 2017 UK Forex Awards. There are already about 5 million accounts registered with this broker due to its powerful big data and quantitative analysis tools.
It is operated by Safecap, which is owned by Playtech PLC. Playtech is part of the list on the stock exchange, which considers Markets.com to be a reliable and safe broker.
Capital.com is one of the best brokers that provide the ability to trade a wide variety of assets: stocks, commodities, cryptocurrencies and indices in the form of CFDs. Trades are made without any commission, and the spread is minimal.
When it comes to forex, it’s hard to find a currency pair that doesn’t exist on Capital.com. It is especially interesting that you can find rare and volatile pairs here.
It is very easy to start trading on Capital.com, as the minimum deposit is only $20 (such small restrictions are rarely found among Forex brokers). You can deposit funds by credit card, bank transfer or e-wallet. The broker is licensed by the British organization FCA, which confirms its complete safety and reliability.
Best Forex broker in India - OctaFX
OctaFX, which was founded in 2011, is the best Forex broker in India as they cater to the various requirements of a wide range of Indian FX traders of varying skill levels. OctaFX has built an excellent reputation in Forex trading in India, thanks to its unique offer of services that makes them the best Forex trading platform in India:
- Made it easier for traders to enter the markets using better trading conditions.
- Offers both MetaTrader and cTrader packages.
- Has received prestigious awards in Central and Eastern Europe and Central Asia.
- Regularly holds contests with various prizes.
OctaFX India supports the Bali Sports Foundation by caring for disabled athletes in Bali and East Indonesia, OctaFX was the proud sponsor of Southampton FC, one of the most outstanding English League teams in England.
As the best Forex trading platform in India, OctaFX offers an ECN account for as little as $5 for MT4 Micro account, and for cTrader ECN, which is common with few Forex brokers in India.
This broker, as revealed in our OctaFX review India, has reached out to most traders by offering two of the most popular platforms in the forex market: MT4 and cTrader are the two main OctaFX platforms. And while MT4 is the more popular among the two trading programs, cTrader offers advanced trading features that are suitable for a specific group of retail and institutional traders. CTrader platforms are more suited to the ECN platform, which drastically reduces OctaFX spreads to 0 pips with a low commission per trade.
Want to trade Forex from India? Open a free account with AtoZ Markets approved forex brokers:
Is OctaFX legal in India?
Although it is headquartered in Saint Vincent and the Grenadines, OctaFX is legal in India. Today, OctaFX is reliable and is leading the foreign exchange market in India as it has obtained an FSA brokerage license as well as an FCA license.
Apart from dominating the currency trading in India, this broker accepts clients in over 100 different countries. US traders, however, are prohibited from opening an account with a broker in accordance with current CFTC and NFA regulations.
Forex trading time in India
Are you curious about the Forex market opening time in India? It is important to note that the global Forex markets are open 24 hours a day. Moreover, there is an overlapping of the Forex trading market, within 2 major time zones:
- New York and London between 12 pm GMT to 5 pm GMT
- London and Asia between 8 am to 9 am GMT
However, that does not mean that participants in the foreign exchange market in India must trade constantly.
Hence, the best time for forex trading in India is 9:00 am to 5:00 pm.
I believe it is essential for every Indian Forex trader to understand the Forex trading time in India. Moreover, it is necessary to learn how to make the best use of the Forex market time in India. Even though currency market time in India is 24 hours a day, the levels of trading activity can differ drastically.
List of countries Forex trading is restricted
List of Forex trading restricted countries are the following:
- Bosnia & Herzegovina
- British Columbia (Canada)
- China (Strict regulations and event total ban)
- Ivory Coast
- North Korea
- Quebec (Canada)
- South Korea
- Sri Lanka (Recently relaxed)
- St. Helena
India is not the only country to restrict Forex trading. Indeed, Forex trading is restricted in twenty countries globally. These countries promote propaganda to push their citizens away from Forex trading (online or offline). Often you'd see some of these countries painting the picture for the west as evil.
For India, trading on other pairs rather than defined by RBI is illegal under the FEMA Act. Trading forex in India through an online broker is a non-bailable offense in India. With many online brokers who misguide retail investors claiming forex trading performed legally through them. Moreover, RBI claims the restrictions are there to prevent retail investors/traders from losing big time. However, many Indian citizens believe that the main reason is to stop currency outflow. Meanwhile, I believe that RBI will ease in its limits in the coming period as India is going through a financial change.
Should you trade Forex on your own at all?
Before you start trading Forex, you'll want to read this.
Our in-house trading expert Dr Yury Safronau, PhD in Economic Sciences, gives you daily his best forex, metals, and cryptocurrencies to buy and sell signals right now.
His trading strategies which are based on non-linear dynamic models have achieved more than 65 000 pips of profits since 2015. And right now there are some very strong buy and sell signals across several markets you don't want to miss.
Want to see which ones?