Capital Market - Exchanges, Intermediaries and Permissible Products
What this domain tests
This domain covers the IFSCA (Capital Market) Regulations, 2021 and the market infrastructure regulations - recognised exchanges, clearing corporations and depositories in GIFT-IFSC, the intermediaries serving them, and the products they may offer.
Core rules
- IFSCA recognises exchanges, clearing corporations and depositories; the operating venues are India INX and NSE IFSC, with their associated clearing corporation and depository.
- Intermediaries - stock brokers, clearing members, custodians, depository participants, merchant bankers, portfolio managers, investment advisers, research analysts and credit rating agencies - register with IFSCA, not SEBI.
- Permissible products include equities, debt securities, depository receipts, ETFs, and derivatives on securities, indices, commodities and currencies; settlement is in foreign currency.
- Resident individuals invest through the LRS cap of USD 250,000 per financial year; there is no separate additional IFSC window.
- Indian securities transaction tax does not apply to trades on IFSC exchanges, and the stamp-duty treatment differs from the domestic market.
Worked example
A resident investor wants USD 400,000 of exposure to global index derivatives on an IFSC exchange in one financial year. She can remit only USD 250,000 under LRS; the remaining USD 150,000 is not permitted however the trade is structured, and splitting it across family members would breach LRS if the funds are beneficially hers. The executing broker must be an IFSCA-registered stock broker, and the contract settles in USD.
Traps that cost marks
Applying SEBI broker or FPI rules verbatim to IFSC exchanges; treating the IFSC route as carrying a remittance limit on top of LRS; assuming INR settlement or domestic market hours; ignoring that one entity may need two registrations (for example broker plus clearing member).