Informist, Friday, Aug 5, 2022

NEW DELHI – The Reserve Bank of India today said that the central bank is looking to make standalone primary dealers as market makers across financial markets. The central bank has proposed to allow standalone PDs to offer all foreign exchange market-making facilities and by allowing them to transact in the foreign currency settled overnight indexed swap market.

"The basic idea is to develop standalone PDs as major player as market makers in financial market," Deputy Governor T. Rabi Sankar said while responding to questions at the post policy press conference.

"Giving them access as market makers to this (interest rate and exchange rate markets) would enable them to provide full suite of market making products to clients." Sankar said.

Sankar said that they expect today's steps to improve the pricing efficiency and having a wider choice of market makers is always a better option.

The central bank has proposed to allow the standalone primary dealers to offer all foreign exchange market-making facilities in order to strengthen their role as market makers, on par with banks operating primary dealer business, the RBI said.

Currently, standalone primary dealers can undertake limited foreign currency business purposes, whereas banks operating primary dealer business are allowed to offer all foreign exchange market making facilities.

"This measure would give forex customers a broader spectrum of market-makers in managing their currency risk, thereby adding breadth to the forex market in India," the RBI said.

The wider market presence of standalone primary dealers would improve their ability to provide support to the primary issuance and secondary market activities in government securities, which remains the major focus activity of primary dealers.

The RBI also proposed to allow standalone primary dealers to transact in foreign currency settled OIS market with non-residents and other market makers. As of now standalone primary dealers are allowed to trade in onshore OIS market. The RBI had permitted banks to do to the same earlier this year in February.

"These measures are expected to remove the segmentation between onshore and offshore OIS markets and improve price discovery," RBI Governor Shaktikanta Das said.  End

Reported by Shubham Rana

Edited by Maheswaran Parameswaran

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