Be careful of FX brokers with office in India

#1
Dear All,

Those of you who are Indian residents and used to trade forex forget about it, better try to go abroad to trade FX or switch to Indian markets if you are an Indian.

No matter what any trader or FX broker tells you FX trading is illegal from Indian residents whether you remit directly or indirectly through friends abroad .... forget about sending the money .... just trading FX is illegal for Indians period.

No way around this.

Don't believe any broker who has setup office in India & tells you they are authorized because they are not, recently I called up Admiral markets India and they gave me some cock and bull story of loopholes and how they are legally allowed to be FX brokers in India and what not

All crap .... if you don't believe me just go to RBI PR section and ask, you can try to make an appointment with the PR officer also and learn for once and for all its illegal.

Also don't believe any trader in this forum or any other who tells you he trades FX for a living because they don't .... no one is. I have challenged anyone to show me there tax returns (with It dept chappa saying received & remove personal info) saying income from foreign exchange and no one has.

I do know one fellow who is trading FX from home for five years (now almost 7 not sure) but he hardly made any money and never filed returns because he didn't make even 3.5 lakhs a year from FX.

I also know one or two other people who trade FX from home but they do managed accounts with big promises and are consistent losers .... total scammers with big talk who have lost money of lots of people. They trade with big risk and obviously have few wining trades and show some money in the account statement and get a commission and then the rest of their trades are losers and they lose everything ... all the investors money but they kept the commission from the few winning trades. they ruin the investor and then look for new bakras with all their big promises and best part is they always find new bakras and proceed to lose all their money as well.

So be careful guys don't fall this

So for once and for all its illegal for Indian residents to trade FX and no one is doing it and paying taxes. I assure you

Check RBI or atleast see this TV expose

Code:
http://www.youtube.com/watch?v=KmSqP8ZjZw0
 

comm4300

Well-Known Member
#2
Thank you for making this clear once and for all.

If you don't mind, here's a hypothetical situation; hope you/other members can shed some light:

a) take part in DEMO competition and WIN prize.
b) prize is funded in REAL account opened by the forex broker. NO remittance is made by the trader.
c) trader makes money and withdraws;


again, this a hypothetical situation. Would this still be considered violation of any law?

thanks.
 
#3
Thank you for making this clear once and for all.

If you don't mind, here's a hypothetical situation; hope you/other members can shed some light:

a) take part in DEMO competition and WIN prize.
b) prize is funded in REAL account opened by the forex broker. NO remittance is made by the trader.
c) trader makes money and withdraws;


again, this a hypothetical situation. Would this still be considered violation of any law?

thanks.
Hi,

thx for your well thought out question. Two points i want to make.

1)RBI guideline clearly states

The Reserve Bank has also clarified that the existing regulations under FEMA, 1999 do not permit residents to trade in foreign exchange in domestic / overseas markets.
The word 'also' in the press release means 'in addition to' therefore forget about transferring money even if you could find a way to transfer money to a broker legally (which you can't) but even if you could, forex trading in itself is illegal and not permitted for Indian residents.

2)This theory of winning demo contests and funding real accounts is a fallacy in the majority of cases. Most brokers will want you to trade a certain number of lots usually standard lots (10000 units of currency) before making a withdrawal thereby ensuring you over leverage your account and the risk of ruin exponentially increases. So mostly you'll wipe out the account but even if you are just lucky and are able to trade the reqd number of lots for withdrawal of funds most brokers will not allow you to withdraw funds. They'll come up with some excuse. I only know one case ie with FXCM who allowed an Indian trader to withdraw money after he fulfilled the minimum lot conditions, but he was just lucky he wasn't wiped out. I know a few other cases were the trader fulfilled the conditions (out of plain dumb luck) but the broker suspended the account giving some excuse like "you are only allowed to trade forex not gold/silver etc"

This is impractical and there here many be a few odd cases of this happening but even if it did, trading FX is clearly illegal for Indian residents.

So answer to your question is "No" under any circumstance.

Only legal way I know of to trade FOREX legally is if you are a non resident or a not ordinarily resident.
 

calic

Active Member
#4
Dear All,

Those of you who are Indian residents and used to trade forex forget about it, better try to go abroad to trade FX or switch to Indian markets if you are an Indian.

No matter what any trader or FX broker tells you FX trading is illegal from Indian residents whether you remit directly or indirectly through friends abroad .... forget about sending the money .... just trading FX is illegal for Indians period.

No way around this.

Don't believe any broker who has setup office in India & tells you they are authorized because they are not, recently I called up Admiral markets India and they gave me some cock and bull story of loopholes and how they are legally allowed to be FX brokers in India and what not

All crap .... if you don't believe me just go to RBI PR section and ask, you can try to make an appointment with the PR officer also and learn for once and for all its illegal.

Also don't believe any trader in this forum or any other who tells you he trades FX for a living because they don't .... no one is. I have challenged anyone to show me there tax returns (with It dept chappa saying received & remove personal info) saying income from foreign exchange and no one has.

I do know one fellow who is trading FX from home for five years (now almost 7 not sure) but he hardly made any money and never filed returns because he didn't make even 3.5 lakhs a year from FX.

I also know one or two other people who trade FX from home but they do managed accounts with big promises and are consistent losers .... total scammers with big talk who have lost money of lots of people. They trade with big risk and obviously have few wining trades and show some money in the account statement and get a commission and then the rest of their trades are losers and they lose everything ... all the investors money but they kept the commission from the few winning trades. they ruin the investor and then look for new bakras with all their big promises and best part is they always find new bakras and proceed to lose all their money as well.

So be careful guys don't fall this

So for once and for all its illegal for Indian residents to trade FX and no one is doing it and paying taxes. I assure you

Check RBI or atleast see this TV expose

Code:
http://www.youtube.com/watch?v=KmSqP8ZjZw0
Thank you for your inut.Recently I opened a demo a/c with 4XP.Soon after after opening the a/c their agent rung me up and talked in my native language. While I enquired them about RBI regulations he said they transfer the money in the pretext of investments in equity abroad and this is allowed.I don't know rules regarding this .Can you throw light on this?
 
#5
Yes this is allowed and their is no problem provided you are actually trading equity abroad. In fact you can even trade currency futures for example such as the 6E contract on CME because CME is a recognized exchange, key word here is "exchange" but this broker is not doing that.

He is essentially lying by saying "purpose is equity investment abroad" by doing this he is covering his side but not yours if you're caught and you will be one day he will throw his hands up saying you took all the decisions. How will he provide statements to the effect showing you're trading or investing in equity?

One thing I've learnt in trading is that if you trade long enough something that can go wrong WILL go wrong one day, what will you do then?

If the broker is also able to provide detailed statements showing the money is used for trading equity or exchange traded products then its OK, but as far as I know the broker will provide you FX statements only.

Ethe old regulations were ambiguous and you could argue your case, but now after RBI clarification in 2011 everyone knows trading OTC FX is illegal, maybe the clerical staff at IT dept don't know but in case of any suspicion the A/O (accessing officer) will send you a notice and you will have to report with all your documents and you will immediately be caught.

People say the IT walla's also dont know the regulations and you can argue with them loopholes but that's all crap if you or me knew knew more than the A/O (who is usually a UPSC pass candidate who got revenue service) then these people wouldn't have jobs.

There are some idiots here who say yes there is a loophole and you can argue your case, I can assure you if you're caught and then you ask these same people they will throw there hands up in helplessness and you'll be screwed because of disinformation of these idiots.

See you probably could bribe then but that's a different issue I'm only discussing the legality.
 

comm4300

Well-Known Member
#6
Here's follow up questio:

Some brokers, like Hotforex issue VISA card.

So, let's say a trader makes profit and requests for VISA card. This card is linked to the Tradng account of the trader [not any bank account];

In this case, the trader can withdraw from any ATM or swipe it across any merchant. Yes, the charges would be high, but this is unique way to withdraw money.

Your thoughts on this type of withdrawal via card.

thanks
 
#7
Here's follow up questio:

Some brokers, like Hotforex issue VISA card.

So, let's say a trader makes profit and requests for VISA card. This card is linked to the Tradng account of the trader [not any bank account];

In this case, the trader can withdraw from any ATM or swipe it across any merchant. Yes, the charges would be high, but this is unique way to withdraw money.

Your thoughts on this type of withdrawal via card.

thanks
This is a very old concept IBFX started this global card years ago when I was trading with them (i never used it because of high commission) and I'm not a big trader with lots of money that transaction charges on the card won't effect me

this was many years ago ----->

http://www.ibfx.com/Promo/Global-Debit

You are very correct in saying the charges to use this card or even withdraw money are very high but anyway lets just assume you have no problem with the charges and use the card

As far as the RBI guidelines go it's illegal to trade OTC Forex so there's no problem using the card but the problem is how will you show this as a source of income to file tax?

you cannot show income from forex trading, if you trade part time and use the card to make small purchases its very unlikely you'll be caught but if you trade full time and depend solely on FOREX trading income for a living using the card is no problem but what source of income will you show on your tax returns, if you show currency trading you must have digital contract notes which shows transaction via an exchange to back up your claims just in case.
 
#8
Keeping aside the issue of "legality" for Indian residents to trade FX overseas
Lets consider what risk your taking when trading FX
I am not talking market risk but other risks
1) It is not a True regulated exchange like NSE/BSE/ NYSE/ ASX/ CME ETC
It is a OTC ( Over the counter market)) meaning the broker normally has conflict of interest with you... unlike normal exchange broker where al the broker is interested in is you to trade volumes a FX provider is the "House" for you to win the have to loose...
Now there are other versions of FX where there is thing called True DMA ( Direct Market access or an ECN ( Electronics Currency Network.. where it acts like a true Exchange ..
The million dollar question is How do you know if the broker is acting like a true Exchange?

2) Regulated in a good jurisdiction:
Do not touch anybody unless the country they are regulated in have robust "Client Money Safety"
From that point of view min I would look for is USA CFTC regulated broker or UK , FSA regulated ( 100% regulated not a Representative status)

Having said that there is still an issue in this regulations
If your money is with a a Equity/ Option broker teh funds are insured by SIPC in USA or FSIC in UK
HOWEVER FUNDS AT FX AND FUTURES AND CFD BROKERS ARE NOT INSURED ( Don't know about India)
Does anybody know what happens to your cash funds seating with the Indian broker if the firms goes burst !

3) Requote: Remember I mentioned about "Conflict of Interest" there is where many FX brokers are notorious for "Chasing you stop" " changing quote of what you see as tradable on the platform.

4) EA expert Advisors sellers/ Seminar sellers .. beware of people selling Automatic robot which promises to make you money automatically ( popular with MT4 platform..
They might be targeting Indian consumers

Think about it if a robot can make you money why would anybody sale it?????