FX Retail – RBI Rolls Out New Forex Retail Trading Platform Formatted: Font: (Default) Arial

The Reserve Bank of India recently announced the roll out of a new forex retail trading
platform. The retail forex platform is also called FX Clear. The Clearing Corporation of India Formatted: Font: (Default) Arial
(CCIL) shall roll this currency trading platform on August 5, 2019. The main aim behind this step
is ensuring fair and transparent pricing for retail users. These include the retail customers or
individuals; as well as themicro, small and medium enterprises and other corproates. Formatted: Font: (Default) Arial
Besides providing transparency, the project aims to promote competition in the market by Formatted: Font: (Default) Arial
ensuring fair pricing for allexchange rate for all. The platform with unify the existing fragmented Formatted: Font: (Default) Arial
market microstructure and achieve its aim regardless of the order size. This will be among the
pioneering forex trading platforms for retail customers.The customer registration process
has commenceds on July 1, 2019. Formatted: Font: (Default) Arial
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FX retail allows retail users to exchange currency with ease. It aims to provide a fair platform
and transparent pricing for the retail customers. Thise issue of opaque pricing was raised in
various public interactions of the central bank. So, the Central Bank finally decided to come up
with a viable solution.

Which market segments will it benefit and how?

The platform creates a market infrastructure ensuring transparent and fair pricing for users of
the foreign exchange market. It will be highly beneficial for the SMEs, individuals and Formatted: Font: (Default) Arial, Bold
importers & exporters. By unification of the existing fragmented market microstructure, it will Formatted: Font: (Default) Arial
ensure fair pricing, regardless the order size, especially benefiting the users with smaller
requirements.

As per sources, the orders placed by customers will be bunched into marketable lots of USD 5
million and above. The same can be directly traded by the CCIL platform in the interbank
market. Hence, the retail customers can now avail the superfine interbank rates. The move
aims to reduce the high spread and other charges being levied by banks on transactions of a
customer in foreign exchange by retail and MSME entities.

All transactions carried out FX Clear will be at correct interbank spot rate and spread charged
by bank will be clearly visible. Currently importers-exporters find it difficult to know exact spread
charged by bank on each transaction. Once the MSME knows the spread charged, he/ she can
negotiate and make it fair.

The platform will reduce risks for the bank to warehouse small transactions. The portal will be Formatted: Font: (Default) Arial
highly useful as the banks will give a portal to their customers and ensure transparency in the
margin and spot rates. It has certain limitations and is not useful if you wish to make a forward
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booking. Also, it has a per day transaction amount limit.
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Limitations of the new retail FX platform Formatted: Font: (Default) Arial, Bold
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 Ordering is allowed up to 4:30 PM. Yet, the import transactions of value date cash will be
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settled by 1:30 PM, which is a slight limitation of the platform.
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  Only CTS (Cash-Spot-Tomorrow) deals are allowed. No forward booking is currently Formatted: Font: (Default) Arial, 11 pt
permitted Formatted: Font: (Default) Arial, 11 pt
Corporates have to depend on bank to register them on CCIL. Banks may have to set up Formatted: List Paragraph, Bulleted + Level: 1 + Aligned at:
settlement limits for clients to handle any settlementrisk arising out of transaction discrepancy. 0.25" + Indent at: 0.5"
For corporates having credit facility with bank, it may be easy to carve out a small limit as
settlement limit. However for corporates with no credit limits, banks would have to do a credit
assessment to sanctionlimit or take any liquid collateral like fixed deposit to sanction the limit.
Thought, such limit amount could be very small and our estimate suggests a range of 0.5-1.5%. Formatted: Font: (Default) Arial

Daily Transactions and Charges Formatted: Font: (Default) Arial

There is no cap on the buy or sell transactions per customer per day. Yet, the total transactions
for a particular customer will be subject to the limit assigned by the individual’s bank.

As per the Reserve Bank of India, the Clearing Corporation of India shall not levy any
charges on transactions below $50,000 per day. In case the customer’s transactions exceed
the above mentioned amount, CCIL will levy a charge of 0.0004% for all such transactions
(about 0.25 paise per USD). The electronic trading platform will indicate any fees charged by Formatted: Font: (Default) Arial
the banks. Banks will be allowed to recover the same from the transactions of the customer and
the settlement charges levied by CCIL. A single transaction on this forex platform shall not
excess $ 5 million.

What are the expected features of this new FX Retail platform?

The FX retail platform will allow a user to access it for purchase or selling of US dollar against
the rupee. This can be done for delivery on same day or ‘cash basis’, basis next day or
tomorrow and on spot basis, which is two days post the transaction. Currently, the automated
trading platform is offering only CTS and will not offer forwards, but the same is expected in the Formatted: Font: (Default) Arial
future.

The platform will display FX-CLEAR interbank spot rates for the ease of the customers.

How to access the forex retail trading platform?

Any customer, using the services of any Indian bank can access the platform. All you need to do
is visit https://www.fxretail.co.in. According to sources from the Central Bank, after the CCIL Formatted: Default Paragraph Font, Font: (Default) Arial
developed the platform, it was texted by users. Starting early August, customers can start using Formatted: Font: (Default) Arial, No underline, Font color:
it. Auto
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Customer registration process has commenced on July 1, 2019. Transactions will be allowed on Formatted: Font: (Default) Arial, No underline, Font color:
the platform following August 5, 2019. As per a notification published by CCIL on its website, Auto
customers must get registration done to avail the benefits of the FX-Retail platform. The Formatted: Font: (Default) Arial, No underline, Font color:
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Clearing Corporation of India has created a separate registration portal to fulfill the purpose.
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As per instructions given on the CCIL website, customer must provide their bank while Auto

registering. After successful registration on the portal, details shall be forwarded to the bank. Formatted: Font: (Default) Arial
This will clear bank approval and customer verification. Post approval, the user credentials will Formatted: Font: (Default) Arial, No underline, Font color:
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be shared with the customer. These credentials will include the login ID and password to access
the platform. Formatted: Font: (Default) Arial

How can Edugains help? Formatted: Font: (Default) Arial, Bold, No underline, Font
color: Auto
Edugains could help you to reduce bank charges and spread on foreign exchange transactions. Formatted: Font: (Default) Arial, Bold
It could also help MSMEs and other corporates with managing intraday fluctuations and develop
a sound hedging strategy.

Edugains is a niche advisory and outsourcing company in domain of banking and foreign Formatted: Font: 11 pt, No underline, Font color: Auto
exchange risk management. We started operations in 2011 and since then we have been Formatted: Font: 11 pt, No underline
helping SME corporate across India to reduce their overall finance cost and manage the
currency risk on import- export transactions. Edugains as a part of its advisory services helps
businesses with following: Formatted: Font: 11 pt

 Forward hedging, Formatted: No underline, English (India)

 Options hedging, Formatted: Font: 11 pt
 LIBOR hedging Formatted: No underline, English (India)
 ECB hedging
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 Exchange rate savings in day to day remittances,
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 Long term foreign exchange hedging,
 Currency SWAPS Formatted: Font: 11 pt
 Large Value Transactions Formatted: No underline, English (India)
 Managing transactions in exotic currencies Formatted: Font: 11 pt
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We help our customers get the best forex deals from the banks by negotiating with their bankers
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and also providing alternate banks for forex deals that reduces the transaction cost for our
clients. We also hedge the forex exposure to our clients in all such transactions such that your Formatted: Font: 11 pt

forex risk is minimized. Formatted: No underline, English (India)

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