[By Ayushman Shrivastava]
The author is a student of Hidayatullah National Law University (HNLU), Raipur
Introduction
In July 2025, the Reserve Bank of India (“RBI”) issued its Master Direction – Reserve Bank of India (Electronic Trading Platforms) Directions, 2025 (“2025 Master Directions”), replacing the 2018 framework and the earlier 2024 draft. At its heart, this latest framework signals a decisive pivot: steering ETP activity firmly onshore. The RBI’s rationale is twofold. First, by bringing more trading within domestic regulation, it seeks to enhance transparency, prevent market abuse and strengthen risk controls—goals first signalled in its 2017 Statement on Developmental and Regulatory Policies.
Some of the key procedural refinements include scrapping the two-stage in principle approval (a six‑to‑twelve‑month preliminary hurdle) and shifting applications to the RBI’s PRAVAAH portal. Yet beneath this aim for efficiency lies a more stringent regime at its core. Banks and primary dealers enjoy an exemption but still remain subject to the RBI’s discretionary mandates. While the regulator’s Alert List has expanded, due diligence has been strengthened through cross-agency information-sharing, and selective licensing is now established as a “will” rather than a “may”. That is to say, where previous drafts implied the RBI would be at liberty to exercise discretion in determining who would be authorized to carry on ETPs, the 2025 Master Directions leave no doubt that the RBI will be selective.
Code, Compliance, and Control: RBI’s Stepwise Redesign of ETP Norms (2017–2025)
India’s journey to regulate Electronic Trading Platforms (ETPs) is not just a chronological evolution, but also a systematic tightening of regulatory precision and technological scrutiny.. Its origin lies in RBI’s 2017 Statement on Developmental and Regulatory Policies, where it identified the necessity for a strong ETP framework—designed to promote transparency, prevent settlement risk and contain market manipulation.
This was followed by the Electronic Trading Platforms (Reserve Bank) Directions, 2018, which further categorised ETPs as any electronic system (other than recognised stock exchanges) to carry out transactions in “eligible instruments” such as government securities, money market instruments and forex derivatives. The 2018 guidelines mandated ETP operators to have strong audit trail mechanisms, ensure end-to-end encryption, achieve uptime and latency standards and keep data locally. However, partial exemptions were chiselled out for scheduled commercial banks, which were exempted from similar eligibility criteria.
In response to the emergence of new grey zones – especially those involving offshore operators and algorithmic trading – the 2024 Draft Directions were introduced by the Central Bank. Furthermore, these directions also marked a departure from old practices. They prescribed model risk management practices, pre- and post-trade measures and even mandatory FATF-country integration for offshore ETPs. Quarterly detailed disclosures were also required, which included spikes in latency, market abuse and cyber-attacks.
The recent 2025 Master Directions, however, go further, not through rule volume, but precision, emphasising targeted controls over broad prescriptions.The residency clause has now been removed, and it has also subtly shifted the definition of “entity” to include anyone, anywhere. Algorithmic trading is now subject to specific control layers: message throttling, price collars, execution slippage analysis and audit logs. The requirements of information security are no less strict-compulsory CISA or CERT-In empanelled IT audit, BC-DR drills, real-time SIEM logging and role-based access governance are now a necessity.
Most importantly, perhaps, RBI now has the authority to tap into the intelligence of any Indian regulator, SEBI, FIU, or the Ministry of Corporate Affairs, as the case may be. This sneaky insertion of cross-regulatory due diligence reflects a regulatory environment that is no longer content with surface-level compliance-based regulation, but one that is based on systemic control and traceability.
Digitising Control: RBI’s Authorisation Framework Enters a New Era
The 2025 Master Directions are a paradigm shift in the manner in which the Reserve Bank of India (RBI) exercises its gatekeeping functions over Electronic Trading Platforms (ETPs), namely by digitising its procedures and by tightening its discretionary thresholds. On one hand, the administrative streamlining is being presented positively on the surface; on the other hand, the regulatory position is more discriminatory and control-oriented.
Among the most important procedural innovations, it is worth noting the shift of the entire authorisation process to the PRAVAAH portal. Unlike the traditional manual filing system mandated under the 2018 guidelines and reiterated in the 2024 Draft Directions, PRAVAAH enables streamlined processing through real-time monitoring, automated data entry, and document standardisation standardised documentation. As a matter of commercial law, this reduces procedural opacity, while formalising the way RBI gathers data and audit trails. This gives the regulator systematic visibility into applicant behaviour and compliance preparedness.
Just as important is the elimination of the “in-principle” approval process, which under the 2024 Draft was a soft filter with a six-month shelf life. The 2025 Directions subsume the two-step model into one full-fledged application. Although this might eliminate procedural exhaustion, it also requires the institutional world to be fully ready from the beginning.
Significantly, the RBI has changed its stance from permissive to selective. The text of Section 9(b) of the 2025 Directions is that RBI “will be selective” in granting ETP authorisations, abandoning the discretionary “may” of the previous draft. This transition from optional discretion to mandatory selectivity has profound commercial implications. Legal entities including entities with pre-existing foreign approvals are now required to prove capital adequacy, operating resilience and strong systems of compliance attuned to Indian legal standards. In effect, RBI’s digitalisation drive is not merely administrative, but also structural. Authorisation is no longer just a compliance formality; it is a threshold test for market entry, tightly guarded by centralised, data-driven discretion.
Jurisdictional Retrenchment: Phasing Out Offshore ETPs and Redrawing Boundaries
One of the major policy changes that is evident in the 2025 Master Directions is the explicit removal of the extensive offshore ETP system proposed in the 2024 Draft Directions. The draft proposed a systematic form of regulatory regime on offshore platforms, which included incorporation in a jurisdiction identified by FATF, individual registration by RBI and prohibition on rupee derivatives trading. It also comprised the requirement of continuous monitoring, reporting every three months, and adherence to the data localisation standards in India.
The 2025 Master Directions do away with this model altogether, removing jurisdictional provisions and replacing them with a residency-neutral definition of an entity: any natural or legal person. This appears to make market participation easier. Practically, however, it is a jurisdictional step back: by omitting clear offshore provisions, the RBI is sending a policy message that it wants to build a robust domestic ETP ecosystem before re-opening the floodgates to cross-border platforms once again. It creates certainty and uncertainty legally. Certainty, because offshore operators no longer have a codified path to compliance; uncertainty, because RBI continues to have broad discretion to regulate foreign-origin entities that indirectly transact with Indian participants. Without clear rules, this control may be established by case-by-case enforcement, usually via the Alert List channel.
The message to the market players is simple: India’s ETP jurisdiction is, at least in the short term, an onshore-first jurisdiction. Offshore platforms must either establish domestic institutions that are compliant or be marginalized, which raises challenging issues of jurisdiction, legality of cross-border flows of data and interplay between the authority of RBI and international financial regulation.
Market Innovation vs Regulatory Control: Unpacking the Legal Trade-Off
The 2025 Master Directions are but one example of a long standing regulatory dilemma: the tension between promoting market innovation and preserving supervisory control.
This contrast sets the context of a wider doctrinal issue of financial regulation: how to achieve stability, transparency and integrity in the market without suppressing innovation in trading infrastructure. Sandbox regimes like the EU under MiFID II and Singapore MAS regimes permit controlled experimentation with algorithmic and high-frequency execution systems, distributed-ledger (DLT) settlement mechanisms, and alternative trading venues that operate outside traditional exchanges. By contrast, the RBI’s approach in the 2025 Master Directions does not provide a sandbox framework; rather, it emphasises market development through formal authorisation processes, tighter entry criteria, and enhanced compliance obligations.
As a matter of fact, the trade-off is between entry barriers and compliance costs. Domestic innovators have to absorb upfront governance, cyber-resilience and capital readiness, and foreign entrants have to contend with jurisdictional risks once the offshore regime is removed. This risk-averse strategy can cushion India against systemic shocks and unregulated capital flows, but can impede access to international pools of liquidity.
Conclusion
The 2025 Master Directions are more than a marginal update – they are a conscious re-alignment of India’s ETP ecosystem. By centralizing authorization via the PRAVAAH portal, eliminating the in-principle approval process, and taking a bold first step towards selective licensing, the RBI has infused structural controls into procedural efficiency. Elimination of offshore provisions is a sign of jurisdictional realignment, choosing a domestically anchored trading environment over interoperability at the international level, at least in the short term.
From the point of view of legal professionals and market players, the duality of the framework is astounding. It simplifies some processes while at the same time increasing substantive entry barriers, so that only governance-capable, well-capitalised players can operate. This blend of digital surveillance, cross-regulatory intelligence collection, and targeted discretion signals the RBI’s goal of building a robust, surveillance-conducive trading infrastructure.
The compromise is inescapable: innovation will continue, but within the closely defined boundaries of the regulator. The success of this onshore-first strategy in shaping India as a competitive global financial hub or in limiting its integration in global markets will hinge on the extent of flexibility with which the RBI forges its policy in the years to come. Nowadays, ETP operators face a market of promise—but only for those who can overcome a judiciously designed barrier.