RBI issues directions on market manipulation

The Reserve Bank of India (RBI), in order to regulate the markets for financial instruments, has issued the Reserve Bank of India (Prevention of Market Abuse) Directions, 2019 (directions), on 15 March 2019. The directions are applicable to all persons dealing in securities, money market instruments, foreign exchange instruments, derivatives or other instruments of like nature. However, banks and central government (acting in furtherance of monetary, fiscal or other policies) shall remain outside the purview of the directions.

The directions provide guidelines in relation to market manipulation, benchmark manipulation and misuse of information. It prescribes that a market participant (person transacting in the market, or facilitating a transaction in the market for financial instruments) in possession of “non-public price-sensitive information” (any information that is not publicly available and which may affect the price of a financial instrument if made publicly available) shall not use it for their own material benefit or for the benefit of others. Market participants shall also not be allowed to use “price-sensitive customer information” (any information pertaining to transactions or potential transactions of a customer that is not publicly available and which may affect the price of any financial instrument if made publicly available) for transacting on their own account in a way that may adversely affect any customer’s outcome in that transaction.

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