Exchange brokers
Exchange Brokers’ Association
Recognition of brokers:
Exchange brokers’ contracts
Exchange brokerage payable by
banks:
Chapter 10: Business through Exchange Brokers (Old Rule 3
reproduced)
- Exchange brokers
When banks make contracts through brokers, such contracts only be made through,
and exchange brokerage be paid only to accredited exchange brokers.
No brokerage or other form of remuneration shall be paid by the banks to Munshis
or other bank employees on contracts made in respect of any foreign exchange
business.
Accredited exchange brokers are permitted to contract exchange business on
behalf of Authorised Dealers in foreign exchange only upon the understanding
that they will conform to the rates, rules and conditions laid down by this
Association.
Direct dealings between banks, who are Authorised Dealers in foreign exchange,
are permitted in centers which are serviced by recognized borkers’ associations,
provided that the minimum lots for such direct deals shall be Pond Sterling
250,000 or US Dollar 500,000 or equivalent in other currencies. (AR 1.85 of
2.1.1985).
In centers which are not serviced by recognized brokers’ associations, banks,
who are Authorised Dealers in foreign exchange, are permitted to deal directly
without any stipulation as to a minimum amount.
Any accredited broker who knowingly concludes any exchange business contrary to
the rules of this Association or to the intent of those rules may have his
recognition withdrawn in consultation with the recognized brokers’ association
in that center and no Authorised Dealer shall transact business with him
thereafter.
It shall be the duty of each Authorised Dealer and of a recognized brokers’
association to report to the Association’s committee for the center concerned
the name of any broker who suggests or proposes any business which is contrary
to the rules of this association. (see code of conduct for brokers/ bankers)
- Exchange Brokers’ Association
In Bombay, Calcutta and Madras accredited brokers must be members of Exchange
Brokers’ Associations which are recognized by this Association or must be
brokers specially recognized by the Managing Committee in the case of Bombay and
by the respective local committees in the case of Calcutta and Madras and must
have made the required deposit of Rs. 10,000/- if in Bombay or Calcutta or Rs.
5,000/- if in Madras, in cash or in Government Securities, of equivalent market
value with recognized Exchange Brokers’ Association or with the Association in
the case of specially accredited brokers. Should an accredited broker wish to
tender a fixed deposit receipt in lieu of cash or Government Securities
required, a fixed deposit receipt, together with a suitable letter of lien may
be accepted provided that the fixed deposit has been issued by an Authorised
Dealer in foreign exchange and that the term of the fixed deposit is less than
two years.
The recognized Exchange Borkers’ Associations must approve and notify to this
Association’s local committee at the center concerned all changes in their
membership, in the composition of their member firms, and in the persons
authorized to call on banks. Such advices must emanate from the recognized
Brokers’ Association address either this Association or any of its Members on
these matters direct.
Disputes which may arise within the membership of any recognized Brokers’
Association must be settled by that Association among themselves. Such disputes
may not be referred to this Association nor to any of its Members for
arbitration or conciliation.
- Recognition of brokers:
(This authority withdrawn vide Circular No. Mg. Com 27184 dated 9th October
1984.)
Detailed arrangements for the recognition of the Exchange Brokers’ Association,
or individual brokers where no such association has been formed, or where
individual brokers are specially recognized, shall, at each center, be decided
upon by the Committee at that centre.
- Exchange brokers’ contracts
All contracts must bear the clause:
“Subject to the Rules and Regulations of the Foreign Exchange Dealers’
Association of India”.
No exchange contract shall be made with a broker as a principal or in a name
known to be used by the broker for the purpose of jobbing. A bank must refuse to
give delivery to or take delivery from any party other than the declared
principal or a bank.
- Exchange brokerage payable by banks:
[AR 1/89 dated 30.6.89] [ECS. 690/86 (Spl.)-88/89 dated 4.4.89] Type of Business
Rate of brokerage (payable both by selling and buying banks) (I) Spot & outright
forward business against the Rupee: All Currencies 0.007% i.e. 7 paise per Rs.
1000/- (II) Swap transactions in foreign curr- encies against the Rupee: i.
‘Short’ swaps i.e. where the delivery of the farther leg is due within the sport
date: Rs. 500/- per US Dollar one million or equivalent for each leg of the
transaction. ii. ‘Long’ swaps (i.e. other than ‘Short’ swaps): All Currencies
0.0105% i.e. 10.50 paise per Rs. 1000/- (III) Switches (i.e. sales of foreign
currencies against foreign currencies spot or outright forward). Rs. 650/- per
US Dollar one million or equivalent. (IV) Swaps in foreign currencies against
foreign currencies (irrespective of period). Rs. 250/- per US Dollar one million
or equivalent.