Master Direction – Reserve Bank of India (Electronic Trading Platforms) Directions, 2025 

Introduction

The Reserve Bank of India (“RBI”) published the Master Directions – Electronic Trading Platforms of 2025 under the provisions of Electronic Trading Platforms (“ETPs”) on June 16, 2025. This set of rules and regulations is a replacement of the 2018 directions, which were based on the guidelines of non-exchange electronic trading venues. 2025 Master direction seeks to incorporate fair approaches on risk management, technology, and transparency of ETPs, considering the feedback given by the industry on the draft published on April 29. It also aims to fortify the trust system for ETPs across India. With the publication of the new regulation, all non-recognised stock exchanges are allowed to operate electronic systems where eligible instruments such as securities, money market instruments, currencies, derivatives and other products which the RBI may prescribe are traded.  They are, however, required to meet compliance with the new provisions. Commercial banks and standalone primary dealers that operate closed-loop systems as sole quote providers have limited exemptions but bear strict obligations on reporting and sharing information. 

Law

In its essence, the 2025 Master Direction continues to consider operating an ETP without prior RBI approval to be unlawful. Entities, intending to start or continue ETP operations, are required to apply through the RBI’s online PRAVAAH portal, submitting details prescribed in Annexe 1: corporate structure and ownership pattern (including non-resident shareholding within FEMA limits), technology infrastructure, and governance framework. To avoid regulatory arbitrage in the definition of the boundary, the Master Direction codifies certain expressions for uniformity as concepts. ETP is defined as any electronic system, excluding a recognised stock exchange, which facilitates the contracting of eligible instruments. Algorithmic Trading is defined as the automated initiation and execution of trade orders through pre-set software systems. 

Eligible Instruments include a comprehensive range of assets such as equities, corporate and government bonds, money market instruments, foreign exchange, derivatives (including options, futures, and swaps), as well as any other instruments that the RBI may announce in the future. The Direction seeks cohesion in India’s financial regulatory framework by defining laws like the Companies Act, 2013 and the Foreign Exchange Management Act, 1999. 

Eligibility criteria for ETPs are organised along three key dimensions:  

1. Corporate: The applicants have to be Indian incorporated companies having governance structures with board-level accountability. A minimum of two key managerial personnel or the company must hold the position with a minimum of three years operational experience in financial market infrastructure—this ensures that leadership grasps market realities along with operational hurdles. 
2. Financial: Applicants are required to possess a minimum net worth of ₹5 crore, which serves as a buffer against market fluctuations or operational losses. 
3. Technological:  Platforms must have proven sophisticated, scalable, and cyber-secure systems capable of processing high message volumes for low-latency execution and dissemination of trade information in real-time or near real-time. 

Amendments

In contrast to the 2018 framework, the 2025 Master Direction brings in changes of greater importance: 

• Improved Membership and Onboarding 

Platforms are now required to clearly and publicly state non-discriminatory onboarding processes and membership criteria. Each participant is uniquely identified either through LEI or PAN, ensuring no shell or anonymous entities can participate and allowing precise monitoring of activities. Admission criteria, fees, codified behaviours, liabilities, and trading acts must be prominently available on the platform’s site. 

• Improved Risk Management 

An internal control system distinct from other business activities of the operator is required to ensure the segregation of ETP operations. Controls to guard against fat finger errors must include price and size order limits (Pre-trade checks), and post-trade surveillance must be able to identify wash trades, spoofing, or layering. Additional rules govern algorithmic trading: trading algorithms must be back-tested and real-time tested in simulated environments before they can be put into operation. Detailed records must be kept of algorithmic strategy parameters and runtime decisions, a chief risk officer must be appointed to supervise model risk on a continuous basis, and active governance of design and execution is paramount. 

• Comprehensive Market Surveillance and Integrity 

Market participants must be consulted when determining the parameters that will alert real-time surveillance systems to unusual trading activity. Post-trade analytics must create exception reports highlighting possible market manipulation risks, with compliance and the RBI automatically notified. Dispute resolution systems, whether internal tribunals or contracts with external arbitral bodies, should allow the swift resolution of participant disputes. 

• Interest Conflicts and Opacity of Fees 

Transactions involving ETP operators, sponsors, or associated companies must incorporate safeguards against preferential pricing or access and be disclosed. Uniform pricing is required for all fees, including trading, connectivity, data feeds, and membership. Documentation is mandatory for any tiered or volume-based pricing adjustments. 

• Outsourcing Governance 

ETP operators are permitted to delegate non-core functions (such as IT systems, client onboarding, or back office clearing). However, these operators must ensure compliance. Service contracts must ensure strict data confidentiality, privacy, security audits by the RBI, and service continuity, even if contracts are terminated. 

• Business Continuity and IT/IS Audits 

Operators must have in place a full business continuity plan along with a recovery site that is capable of critical function restoration within set recovery time objectives. Annual IT/IS audits are mandatory for these institutions and must be performed by a CISA-certified or CERT-in-empowered firm. Such IT auditors evaluate network security, application-level vulnerabilities, data encryption standards as well as incident response and data breach containment procedures. The RBI has the authority to mandate special audits where heightened cyber or operational risks are perceived. 

• Data Retention and Reporting 

All transaction data, order logs, trade confirmations, and message trails should be retained for no less than ten years with encrypted, off-site backups. Submission of reports covering member count, system outages or disruptions, market abuse flags, aggregate transaction volume, turnover, and algorithmic trading proportion happens quarterly, with the first submission by the 15th of the quarter succeeding. Then submit gross average bid-ask spreads, where applicable. An annual compliance certificate is submitted by April 30 that certifies compliance with the Master Direction and any imposed conditions on the license issued. In addition, they must submit granular transaction records to an RBI-recognised trade repository in real-time as required to mitigate systemic risks and for post-event investigations. 

Conclusion

The Master Direction – RBI (Electronic Trading Platforms) Directions, 2025, marks a transformative moment for electronic trading in India. The RBI seeks to enhance market integrity, safeguard investors, and stimulate responsible innovation by setting comprehensive requirements for authorisation, governance, risk management, oversight, outsourcing, data maintenance, and reporting. Compliance with the new requirements is necessary for existing ETP operators; new applicants must demonstrate corporate governance, financial strength, technological adequacy, and soundness through detailed submissions on the PRAVAAH portal. With active supervision, complemented by the ability to grant exemptions, impose conditions, or revoke licenses, this Direction balances agility and regulatory framework stability in anticipation of future market innovation.