On June 16, 2025, the Reserve Bank of India (“RBI”) issued the Master Direction titled “Reserve Bank of India (Electronic Trading Platforms) Directions, 2025” (“Directions”). This new regulatory framework replaces the 2018 ETP directions and represents a crucial update in the oversight of electronic trading platforms (“ETPs”) dealing in securities, money market instruments, foreign exchange, derivatives, and similar financial instruments. This introduces a more nuanced, robust, and tech-aware regulatory regime for entities operating digital trading infrastructure in India. The Directions is a critical update designed to bring ETPs under a more formalized structure with enhanced compliance, governance, and operational oversight, reflecting RBI’s intention to strengthen transparency, market integrity, and systemic resilience.
At its core, the new regulatory framework is grounded in the RBI’s recognized need to adapt supervisory approaches in light of evolving market practices and feedback from stakeholders. The RBI, empowered by Section 45W of the Reserve Bank of India Act, 1934, has introduced these Directions following a comprehensive review of the existing regulatory framework as noted in the February 8, 2024, bi-monthly “Monetary Policy Statement”. With the increasing role ETPs play in India’s financial markets, the updated framework seeks to address emerging technological and operational risks while providing clear operational guidelines and obligations for ETP operators and participants.
Overview of the Direction
The Direction applies specifically to ETPs operated by entities other than recognized stock exchanges. An ETP is defined as any electronic system distinct from a recognized stock exchange that contracts eligible instruments, which themselves include securities, money market instruments, foreign exchange, and derivatives, as notified by the RBI. It includes digital platforms that facilitate the trading of eligible financial instruments such as government securities, money market instruments, foreign exchange derivatives, and other products as notified by the RBI. Importantly, it does not apply to electronic systems operated solely by scheduled commercial banks or standalone primary dealers where they act as the sole price provider. However, the RBI has expressly retained the discretion to apply all or part of the framework to such exempt entities if circumstances warrant, particularly in cases involving systemic risk or concerns over fair market access.
A critical thrust of the new Directions is the mandate for prior, written authorization by the RBI before operating any ETP within scope. To qualify, an applicant must be an Indian-incorporated company, and foreign shareholding must align with FEMA and applicable regulatory limits. The promoter entity, as well as at least two key managerial personnel, must demonstrate no less than three years’ experience managing financial market infrastructures. Financial robustness is another pillar, the ETP operator must maintain a minimum net worth of Rs. 5 crore at all times. Additionally, the ETP’s IT infrastructure must be robust and scalable, capable of delivering real-time or near real-time trade information dissemination, risk management, transaction surveillance, and reliable data integrity. Enhanced requirements for cyber security, data governance, and business continuity plans have also been introduced, including annual audits by independent and certified experts.
Applications for authorization (and for any changes to shareholding or management structure) must be submitted through the RBI’s PRAVAAH digital portal, offering transparency and standardized assessment. Once authorised, ETPs are required to operate strictly within the scope of permitted instruments, as defined by the RBI. Any subsequent material changes, whether in shareholding, governance, or operations must be promptly notified to the regulator. The RBI has also reserved the right to impose conditions on authorisation and to revoke or suspend the authorisation in cases of non-compliance, market abuse, or systemic risk.
The Directions also elaborates on roles such as the “ETP Operator” (an entity authorized by the RBI to run an ETP), and terms significant to compliance such as “algorithmic trading” (trades executed using automated software), “key managerial personnel,” “net worth,” and reference to “resident” and “non-resident” under the Foreign Exchange Management Act, 1999.
Implications on the Stakeholders
One of the most notable features of the Directions is the enhanced compliance and reporting burden placed on ETP operators. Platforms are required to submit quarterly reports detailing their functioning and trading activity by the 15th of the month following each quarter. Additionally, an annual compliance report must be submitted by April 30 each year, documenting adherence to the various obligations laid out under the Master Direction. Apart from these periodic filings, ETPs are also expected to report transaction-level data to designated trade repositories or directly to the RBI, as specified. In the event of any operational disruptions, security breaches, or suspected market misconduct, immediate notification to the RBI via email is mandated.
From a governance and operational standpoint, the Directions requires ETPs to establish a comprehensive framework for onboarding participants, ensuring fair and transparent access. All participants must be assigned unique identifiers such as Legal Entity Identifier (LEI) or Permanent Account Number (PAN), and platform documentation must clearly define the rights, obligations, and dispute resolution mechanisms applicable to all users. The framework also requires ETPs to publish real-time information on bid-offer spreads and post-trade data to ensure market transparency.
Risk management is a stated cornerstone of the framework. Comprehensive internal controls must be enacted, ensuring segregation between the ETP operation and other activities of the parent entity or group, thereby safeguarding platform operations against conflicts of interest or undue influence. Platforms must institute robust pre- and post-trade controls to pre-empt errors, prevent unauthorized trades, and mitigate operational risks such as the so-called “fat finger” incidents. Particularly notable is the detailed oversight prescribed for algorithmic trading—an area of rapid growth and concern. Operators must implement structured onboarding, pre-trade testing, continuous monitoring, and ensure that adequately skilled and appropriately authorized personnel are at the helm of any automated trading processes—a marked escalation from prior requirements and a recognition of algorithmic trading’s systemic risk.
Algorithmic trading, a growing area of activity on electronic platforms, is specifically addressed in the 2025 Direction. ETPs permitting algorithmic trading are required to establish dedicated governance frameworks for model validation, risk controls, and surveillance. Personnel responsible for monitoring such activity must be appropriately qualified, and platforms must ensure full auditability of algo orders and executions. These measures reflect the regulator’s recognition of the growing complexity and potential risks associated with automation in financial markets.
Surveillance and market oversight are strongly emphasized. The Directions impose obligations on operators to carry out real-time and post-transaction market surveillance, to identify and curtail abusive, manipulative, or excessive-trading activities and to report suspicious events to the RBI forthwith. If any group or related entity is involved as a platform member, disclosure to the RBI and clear conflict-of-interest protocols become mandatory. Fee structures must be transparent and non-discriminatory. While outsourcing elements of the platform’s operation is permitted, the outsourcing entity remains responsible for full compliance, security, confidentiality, and resilience, with clear governance, periodic security assessments, and up-to-date disaster recovery plans.
Documentation and data retention gain heightened focus under the new Directions. All platform and transaction data must be preserved in a readily accessible format for at least ten years. Where the RBI or any other legal authority commences an investigation, data relevant to such proceedings must be preserved for at least three years following the conclusion of the inquiry. If a platform ceases operations or is de-authorized, the RBI may require the transfer of all operational and participant data to itself or to a designated, regulated entity.
The practical implications of these Directions are substantial for India’s financial infrastructure providers and their stakeholders. Banks, NBFCs, fintech companies, and compliance officers must undertake urgent and comprehensive reviews of their ETP frameworks, operations, and risk controls, and in many cases significantly upgrade technology, governance, and audit arrangements. Algorithmic trading systems must be scrutinized and brought into compliance with new onboarding, testing, and oversight rules. Documentation, membership onboarding, and reporting frameworks must be overhauled where necessary, even as compliance costs are expected to rise in the short term. However, these investments are likely to yield long-term benefits, not only in the form of regulatory certainty and reputational resilience, but also through the creation of deeper, more liquid, and transparent markets.
Conclusion
In conclusion, the Direction represent a decisive and forward-looking regulatory intervention. It aims to create a transparent, resilient, and well-governed ecosystem for electronic trading while affording the regulator greater supervisory visibility and control. For banks, NBFCs, fintech firms, compliance officers, and general counsels, this framework signals a clear shift toward regulatory formalization and technological accountability. Entities either operating or planning to establish ETPs must urgently review their internal governance structures, technology capabilities, and compliance programs to align with the new regulatory expectations. As the digitalization of Indian capital markets accelerates, this Direction will serve as a critical pillar of trust, integrity, and systemic stability.
