Master Direction – Reserve Bank of India (Market-makers in OTC Derivatives) Directions, 2021
The Reserve Bank of India has issued directions for market-makers in Over-the-Counter (OTC) derivatives, effective from September 16, 2021.
The directions cover various aspects, including:
Governance: Market-makers must have a robust governance structure in place.
Products: Permitted products include interest rate derivatives, foreign exchange derivatives, and credit derivatives. Market-makers must conduct due diligence on products and ensure proper pricing and valuation.
User Dealing Conduct: Market-makers must classify users, provide product disclosure statements, and conduct due diligence on users. They must also verify user authority and ensure proper trade conduct.
Risk Management: Market-makers must have a robust risk management framework in place to manage risks associated with OTC derivatives.
Internal Control and Audit: Market-makers must have internal control mechanisms and conduct regular internal audits to ensure compliance with the directions.
Preservation of Records: Market-makers must preserve records of all transactions and activities related to OTC derivatives.
The directions repeal all previous directions and guidelines on the subject.
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