RBI has, on March 15, 2019, issued the RBI (Prevention of Market Abuse) Directions, 2019 (‘PMA Directions’), to all persons dealing in securities, money market instruments, foreign exchange instruments, derivatives or other instruments of similar nature as RBI may specify from time to time, with a view to prevent market abuse. The PMA Directions have come into force on March 15, 2019. The key features of the PMA Directions are as follows:
i. Market manipulation: The PMA Directions stipulate that persons transacting or facilitating a transaction in the markets for financial instruments (‘Market Participants’) will not: (i) engage in any transaction or any act of omission or commission which may result in, or seek to convey, a false or misleading impression as to the price of, or supply of, or demand for, a financial instrument, carried out with the intention of making an undue financial gain or any other material benefit. This includes any transaction or action which may result in, or is intended to result in, an artificial price of a financial instrument; and/or (ii) undertake transactions on an electronic trading platform which may disrupt or delay its functioning.
ii. Benchmark manipulation: Market Participants will not undertake and/or initiate any action with the intention of manipulating the calculation and/or influencing a benchmark rate or a reference rate.
iii. Misuse of information: Market Participants will not: (i) use any non-public price-sensitive information (i.e., information which is not publicly available, and which may affect the price of a financial instrument if made publicly available) for any material benefit to itself or to others; (ii) use any price sensitive customer information (i.e., information pertaining to transactions or potential transactions of a customer which is not publicly available, and which may affect the price of any financial instrument if made publicly available) for any transaction on their own account in a manner which adversely affects the outcome for the customer; and (iii) intentionally (i.e., without exercising due diligence as to the veracity of the information) create or transmit false or inaccurate information or withhold timely information which is required to be reported or made public, which influences or is likely to influence the price of any financial instrument.
iv. Monitoring, compliance and reports: Market Participants must report any instance of market abuse or attempted market abuse detected by them to RBI promptly and must provide any data and/or information as may be required by RBI in this regard.
v. Regulatory action for market abuse: Market Participants committing market abuse will be liable to be denied market access in one or more instruments for a period which may not exceed one month at a time. All instances of such action will be made public by RBI.