September 16, 2021
To,
All Eligible Market Participants
Madam/Sir,
Please refer to Paragraph 11 of the Statement on Developmental and Regulatory Policies announced as a part of the Bi-monthly Monetary Policy Statement for 2020-21 dated December 04, 2020, regarding review of the Comprehensive Guidelines on Derivatives (CGD).
2. The draft Reserve Bank of India (Market-makers in OTC Derivatives) Directions, 2020 were released for public comments on December 04, 2020. Based on the feedback received from the market participants, the draft Directions were reviewed and have since been finalised. The Master Direction – Reserve Bank of India (Market-makers in OTC
Derivatives) Directions, 2021 are enclosed herewith.
Yours faithfully,
(Dimple Bhandia)
Chief General Manager
FINANCIAL MARKETS REGULATION DEPARTMENT
Notification No. FMRD.FMD.08/02.03.247/2021-22 dated September 16, 2021
Master Direction – Reserve Bank of India (Market-makers in OTC Derivatives)
Directions, 2021
In exercise of the powers conferred under Section 45W of the Reserve Bank of India Act, 1934 (02 of 1934) (hereinafter called the Act) read with Section 45U of the Act, the Reserve Bank of India (hereinafter called the Reserve Bank) hereby issues the following Directions. A reference is also invited to the Foreign Exchange Management Act, 1999 (42 of 1999) and Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, 2000 (Notification no. FEMA.25/RB-2000 dated May 3, 2000), as amended from time to time.
1. Short title, commencement and applicability
1.1 These Directions shall be called the Master Direction – Reserve Bank of India (Market-makers in OTC Derivatives) Directions, 2021.
1.2 These Directions shall come into force on January 03, 2022.
1.3 These Directions shall apply to entities permitted to act as market-maker in OTC derivatives in terms of the Governing Directions.
2. Definitions
2.1 In these Directions, unless the context otherwise requires:
(i) ‘Company’ shall have the same meaning as assigned to it in Section 2(20) of the Companies Act, 2013 (18 of 2013).
(ii) ‘Credit default swap’ means an OTC derivative in which one counterparty (protection seller) commits to pay to the other counterparty (protection buyer) in the case of a credit event with respect to a reference entity and in return, the protection buyer makes periodic payments (premium) to the protection seller until the maturity of the contract or the credit event, whichever is earlier.
(iii) ‘Currency swap’ means an OTC derivative which commits two counterparties to exchange streams of interest payments and/or principal amounts in different currencies on specified dates over the duration of the swap at a pre-agreed exchange rate.
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