RBI market abuse directions: A mature development

By Sawant Singh and Aditya Bhargava, Phoenix Legal

In June 2018, in what might have been considered a period of relative stability (given the events that transpired thereafter), the Reserve Bank of India (RBI), in its statement on developmental and regulatory policies, proposed the issuance of directions that would prevent abuse in markets regulated by the RBI.

Reserve Bank of India
Sawant Singh
Phoenix Legal

These directions would be in line with global best practices and would be, in addition to other regulations, aimed at increasing the depth of the financial markets. In this vein, while the RBI issued draft directions in September 2018 for public comments, the final Reserve Bank of India (Prevention of Market Abuse) Directions, 2019, were only issued in March 2019, delayed perhaps by turbulent market conditions.

The directions apply to all market participants in securities (including corporate bonds and debentures), derivatives, money market instruments, and similar instruments, but do not apply to transactions executed through recognized stock exchanges in accordance with the regulations of the Securities and Exchange Board of India (SEBI), or transactions by the RBI and the central government “in furtherance of monetary policy, fiscal policy or other public policy objectives”.

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Sawant Singh and Aditya Bhargava are partners at the Mumbai office of Phoenix Legal.

Reserve Bank India

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