STOCKBROKER Business Setup at Gift IFSC

STOCK BROKER Business Setup at Gift IFSC

Overview

GIFT City's International Financial Service Centre (IFSC) launched India's first international exchange in January 2017. This exchange offers trading opportunities across equities, currencies, commodities, and fixed-income securities. To ensure compliance with SEBI regulations, prior approval is necessary for trading securities on IFSC exchanges with a specified lot size. In December 2020, regulations were announced for setting up India's inaugural International Bullion Spot Exchange.

The process and advantages for registering as a stock broker in GIFT City's IFSC.

The stock broker business in the IFSC Gift City plays a crucial role in the evolving landscape of this international financial services center. The launch of the IFSC at GIFT City is seen as a significant step in bringing financial services transactions related to India back to Indian shores. Stock broker businesses are among the key activities in the IFSC capital markets, along with stock exchanges, trading members, and segregated nominee account providers

Overview of STOCK BROKER at Gift IFSC

As India's first International Financial Services Centre (IFSC), GIFT City provides ample opportunities for stockbrokers to set up their businesses. Some key benefits of setting up a brokerage firm in the GIFT IFSC are:

Regulatory framework: The regulatory framework in GIFT IFSC is streamlined, and compliance requirements are easier to fulfill. This makes it convenient for businesses to establish themselves in the SEZ.
Tax benefits: There are several tax benefits available for businesses registered in the GIFT IFSC, including a concessional tax rate, exemptions, and deductions.
Access to international markets: The GIFT IFSC offers access to international financial markets through its global exchange, which facilitates trading in various international products and currencies
World-class infrastructure: The GIFT IFSC has state-of-the-art infrastructure and facilities, making it an attractive destination for businesses seeking growth and development opportunities
Skilled workforce: GIFT City has a skilled workforce with experience in the financial sector, providing businesses with access to a talented pool of professionals

Overall, the GIFT IFSC offers a compelling ecosystem for businesses looking to set up brokerage firms in India's international financial services sector. With its supportive policies, regulatory advantages, and world-class infrastructure, GIFT City is an attractive destination for businesses seeking growth and opportunities in the global financial landscape.

Process for Registration of Stock Broker Business in Gift IFSC

The process for registering a stock broker business in GIFT IFSC (Gujarat International Finance Tec-City (International Financial Services Centre) involves adhering to the regulations set by the organizations responsible for IFSC at GIFT City.

Here is an overview of the registration procedure:

Familiarize Yourself with the Regulations: Get acquainted with the rules, bye-laws, and regulations of the stock exchange at IFSC with which you intend to register as a stock broker.
Compliance with Applicable Regulations: Ensure compliance with all relevant regulations and guidelines prescribed by the regulatory authority governing IFSC.
Selection of Office Space: Identify a suitable office space within GIFT SEZ (Special Economic Zone). This entails entering into an agreement with the developer or co- developer of GIFT SEZ.
Establish Business Operations: Set up your business operations within the selected office space. This will serve as the location for your stock broker business within the IFSC.

Benefits for Stock Brokers Registered in GIFT City - IFSC

Registered stock brokers in GIFT City - IFSC enjoy several advantages compared to brokers registered elsewhere. Here are some key benefits:

Investment Opportunities

GIFT IFSC is home to international exchanges and clearing corporations established by India's major stock exchanges, BSE and NSE. These exchanges offer over 140 products for trading, enabling global investors and Non-Resident Indians to trade from anywhere in the world.

Stock brokers can cater to the following types of investors:

Foreign Portfolio Investors and Eligible Foreign Investors who are residents outside India
Non-Resident Indians
Indian financial institutions or residents eligible to invest funds offshore, as per FEMA/RBI guidelines.

Taxation Benefits

Stock brokers registered in GIFT City - IFSC enjoy favorable taxation benefits, including:

Tax holiday of 10 years out of the first 15 years for business income under section 80LA of the Income Tax Act, 1961. Brokers registered elsewhere in India do not have this specific exemption.
Minimum Alternate Tax (MAT)/Alternate Minimum Tax (AMT) applies only to companies opting for the old tax regime, at a rate of 9% of book profits.
Exemption from Securities Transaction Tax (STT), Commodities Transaction Tax (CTT), and stamp duty on transactions conducted on IFSC exchanges by registered brokers.
No Goods and Services Tax (GST) on services received by IFSC units or provided to offshore clients.

Operational Benefits

In addition to tax and compliance benefits, brokers registered in GIFT City - IFSC enjoy operational advantages, including:

Lower operating costs due to subsidies provided by the Gujarat Government.
Availability of skilled labor.
Proximity to the onshore market.
World-class infrastructure, excellent connectivity, and transportation access.
Access to multiple markets from the IFSC.

Overall, being registered in GIFT City - IFSC offers stock brokers a host of benefits, from enhanced investment opportunities and favorable taxation to operational advantages in a thriving financial ecosystem.

Membership of Stock Exchanges and Clearing Corporations in GIFT IFSC by Foreign Entities

The International Financial Services Centre Authority (IFSCA) has received requests from stock exchanges, clearing corporations, and market participants based in GIFT IFSC and other jurisdictions to enhance the participation of regulated entities from foreign jurisdictions in the stock exchanges and clearing corporations in GIFT IFSC. As a result, eligible foreign entities are now allowed to establish a branch office in GIFT IFSC and operate as stock brokers and clearing members, subject to approval by the IFSCA.

Membership as a Stock Broker

Foreign entities wishing to operate as a stock broker in GIFT IFSC must fulfill the following conditions:

1. The entity must be from a jurisdiction compliant with the Financial Action Task Force (FATF).

2. The entity must be regulated as a stock broker by a securities market authority in its home jurisdiction.

3. The entity must ensure proper segregation of the operational, technological, and financial aspects of its branch office in GIFT IFSC from its overseas operations.

4. The entity must obtain a certificate of registration from the IFSCA before commencing operations in its branch office.

5. The branch office must abide by the rules, bye-laws, and regulations of the stock exchange at GIFT IFSC with which it is registered as a stock broker, as well as the applicable regulations and guidelines prescribed by the IFSCA.

6. The entity's trading servers must be located within GIFT IFSC.

7. The branch office in GIFT IFSC must have a Designated Director/Compliance Officer responsible for ensuring compliance and timely regulatory reporting.

8. The branch office must comply with the prescribed net worth and capital requirements established by the IFSCA/Stock Exchange and fulfill the periodic reporting obligations set by the IFSCA/Stock Exchange.

9. The entity is required to pay a registration fee of USD 1,000 for the grant of a registration certificate.

Membership as a Clearing Member

Foreign entities aiming to operate as a clearing member in GIFT IFSC must meet the following conditions:

10. The entity must be from a jurisdiction compliant with the FATF.

11. The entity must be regulated as a clearing member by a securities market authority in its home jurisdiction.

12. The entity must ensure proper segregation of the operational, technological, and financial aspects of its branch office in GIFT IFSC from its overseas operations.

13. The entity must comply with the rules, bye-laws, and guidelines prescribed by the Clearing Corporation with which it is registered as a clearing member, as well as the regulations and guidelines set by the IFSCA.

14. The entity must obtain a certificate of registration from the IFSCA before commencing operations in its branch office.

15. The branch office must pay the applicable fees for clearing members and have a Designated Director/Compliance Officer responsible for compliance and regulatory reporting.

16. The branch office must comply with the net worth and capital requirements established by the IFSCA/Clearing Corporation and fulfill the periodic reporting obligations set by the IFSCA/Clearing Corporation.

17. The entity is required to pay a registration fee of USD 1,000 for the grant of a registration certificate.

It should be noted that a separate registration is not required for a stock broker registered with the IFSCA to act as a clearing member in a Clearing Corporation in GIFT IFSC.

18. Net Worth and Deposit Requirements for Foreign Stock Brokers and Clearing Members

If you are a foreign entity dealing in securities and wish to operate as a stock broker or clearing member in the International Financial Services Centre (IFSC), you must comply with the net worth and interest-free base minimum capital deposit requirements outlined below:

Net worth and deposit requirements for securities dealing stock brokers and clearing members must meet the criteria as per IFSCA.

19. Both foreign stock brokers and clearing members operating in the IFSC must obtain membership with the respective Stock Exchange/Clearing Corporation and comply with the above requirements. Furthermore, the Stock Exchange/Clearing Corporation must forward admitted members' applications to IFSCA for obtaining a certificate of registration. Operating in securities without obtaining a certificate of registration from IFSCA is not allowed.

Appropriate integrated systems must be put in place by the Stock Exchanges and Clearing Corporations to enable users to carry out seamless online registration applications.

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