The RBI began this process of improving the transparency in the foreign exchange market in 2017 .
By Saikat Das
Mumbai: A new retail currency trading platform goes live today enabling thousands of small businesses to trade at market prices, possibly ending years of complaint that banks cream them off with opaque contracts and fees in currency transactions.
The Clearing Corporation of India’s electronic trading platform would enable exporters and importers to trade in US dollars at market prices, which banks and other brokers have access to. This would help traders improve their profitability while banks may lose some portion of their revenues.
“The platform provides for an anonymous and order driven dealing for the retail customers where they can place orders and trade in the USD/INR currency pair,” said R Sridharan, managing director, CCIL. “Customers can directly place, hit, modify, cancel orders on the platform.”
CCIL’s retail foreign exchange electronic trading platform comes after years of complaints to the regulator by exporters and importers that they get a raw deal from banks through which they buy and sell foreign exchange. Banks charge a hefty fee for foreign exchange transactions crimping the margins of traders as the quantity in most cases small and that the market is not accessible to a large section of businesses.
The RBI began this process of improving the transparency in the foreign exchange market in 2017 and gave a final notification this year. The trading would be handled by Clearcorp Dealing Systems India, a subsidiary of CCIL. Although companies could have live trading screen they have to settle their trades through their banks and they don’t have direct membership with Clearcorp. A bank, which is an authorised currency dealer, has to set the trading limits for its customers who would settle the transactions through the associate banks.
This move would address the transparency issue. “As it was over phone, some authorised bank dealers used to make the most of it especially when it comes to little-known clients,” a trader said. So, total cost used to be derived after adding margin and risk premium over and above the market rate.”