Reserve Bank of India (Market-makers in OTC Derivatives) Directions, 2021

Last updated: 20 September 2021

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The Reserve Bank of India has issued the Master Direction – Reserve Bank of India (Market-makers in OTC Derivatives) Directions, 2021. These directions, which come into effect on January 3, 2022, outline the regulatory framework for entities acting as market-makers in Over-the-Counter (OTC) derivatives. They cover aspects such as governance, product policies, user dealing conduct, risk management, and internal controls to ensure fair and transparent operations in the OTC derivatives market.

RBI/2021-22/84 FMRD.FMD.07/02.03.247/2021-22 September 16, 2021 To, All Eligible Market Participants Madam/Sir, Master Direction Reserve Bank of India (Market-makers in OTC Derivatives) Directions, 2021 Please refer to Paragraph 11 of theStatement on Developmental and Regulatory Policiesannounced as a part of theBi-monthly Monetary Policy Statement for 2020-21 dated December 04, 2020, regarding review of the Comprehensive Guidelines on Derivatives (CGD). 2. The draft Reser

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FAQ :

These Directions shall come into force on January 03, 2022.

These Directions apply to entities permitted to act as market-makers in OTC derivatives in terms of the Governing Directions.

The Board of Directors (or equivalent forum) and senior management must understand the derivative business, demonstrate commitment to risk management and compliance, and approve written policies defining the framework for derivative business and risk management.

The product disclosure statement must include product features, contract terms and conditions, benefits, all risks, pay-off profile, costs and fees, and an illustration of how the product works.

Transactions shall be undertaken in a fair and transparent manner and at prevailing market rates, including roll-over, restructuring, and novation.

Internal audit is conducted to review the adequacy and test the effectiveness of the risk management system and internal controls, investigating unusual occurrences and evaluating the reliability of reported information.

Notification No : v
Source : https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12163&Mode=0

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