Forex, also known as foreign exchange, is the exchange of one currency for another. It is one of the largest and most liquid markets in the world, with an average daily trading volume of over $5 trillion. The forex market is regulated by various acts and regulations to ensure that it operates in a fair and transparent manner. In this article, we will discuss the acts that control forex.
The Foreign Exchange Management Act (FEMA)
The Foreign Exchange Management Act (FEMA) is an act passed by the Indian parliament in 1999 to regulate foreign exchange transactions in India. The act replaced the Foreign Exchange Regulation Act (FERA) of 1973. FEMA is a comprehensive act that covers all aspects of foreign exchange transactions, including buying, selling, and holding of foreign currency, as well as the transfer of funds from India to foreign countries.
FEMA regulates foreign exchange transactions through the Reserve Bank of India (RBI), which is the central bank of India. The RBI is responsible for issuing guidelines and regulations related to foreign exchange transactions, and it also monitors compliance with these regulations.
The Foreign Account Tax Compliance Act (FATCA)
The Foreign Account Tax Compliance Act (FATCA) is a US law that was enacted in 2010 to combat tax evasion by US citizens and residents with foreign financial accounts. FATCA requires foreign financial institutions (FFIs) to report information about their US account holders to the US Internal Revenue Service (IRS).
The reporting requirements under FATCA apply to US citizens and residents, as well as non-US persons who hold US assets or have US income. FFIs that fail to comply with FATCA may be subject to penalties and sanctions.
The Dodd-Frank Wall Street Reform and Consumer Protection Act
The Dodd-Frank Wall Street Reform and Consumer Protection Act was enacted in 2010 in response to the 2008 financial crisis. The act includes provisions that regulate the forex market, including the creation of the Commodity Futures Trading Commission (CFTC).
The CFTC is responsible for regulating the forex market in the US, including oversight of forex dealers, brokers, and traders. The act also requires forex dealers to provide their customers with certain disclosures, including information about the risks of forex trading and the fees associated with forex transactions.
The European Market Infrastructure Regulation (EMIR)
The European Market Infrastructure Regulation (EMIR) is a European Union (EU) regulation that was enacted in 2012 to regulate over-the-counter (OTC) derivatives markets. The regulation includes provisions related to forex transactions, including the requirement for certain forex transactions to be cleared through central counterparties (CCPs).
EMIR also requires reporting of all derivatives transactions to trade repositories, which are entities that collect and maintain records of all derivatives transactions. The regulation applies to both financial and non-financial counterparties.
Conclusion
In conclusion, the forex market is regulated by various acts and regulations to ensure that it operates in a fair and transparent manner. These acts and regulations include the Foreign Exchange Management Act (FEMA), the Foreign Account Tax Compliance Act (FATCA), the Dodd-Frank Wall Street Reform and Consumer Protection Act, and the European Market Infrastructure Regulation (EMIR). These acts and regulations help to ensure that the forex market operates in a safe and secure manner, and that customers are protected from fraud and other abuses.
