IFSCA Master Circular for Broker Dealers and Clearing Members in IFSC – Key Regulatory and Operational Takeaways

IFSCA has issued a comprehensive Master Circular consolidating and superseding earlier SEBI and IFSCA directions for Broker Dealers and Clearing Members operating in IFSC. It aligns with the new IFSCA (Capital Market Intermediaries) Regulations, 2025 and creates a single compliance playbook for intermediaries.

1. Registration, Fees and Validity

All applications must be routed through the Single Window IT System (SWIT), which integrates SEZ, GSTIN and regulator NOC processes. Registration and annual fees are payable as per the IFSCA Fee Circular, with options to pay in USD or INR, and must be remitted net of bank charges. Registration is perpetual, but is effectively contingent on maintaining a valid SEZ Letter of Approval—lapse of LoA can trigger cancellation.

2. Supervision, Oversight and Client Money

Stock Exchanges and Clearing Corporations must frame inspection policies based on risk, share inspection findings across MIIs and report serious/repetitive violations to IFSCA. Brokers must segregate client and proprietary funds, maintain proper use of client collateral and are subject to monitoring of client funds and running account arrangements via standardised consent letters. A failure to maintain required net worth results in a bar on undertaking any business in IFSC until restored.

3. Client Dealing and Market Access

Use of Unique Client Code is mandatory, contract notes must be issued within 24 hours, and proprietary trading must be disclosed upfront at KYC stage. Market access can be provided via Authorised Persons (APs) both in foreign jurisdictions and in India (for LRS-based investors), subject to detailed eligibility, contractual, conduct and disclosure conditions in Annexure 5.

4. Technology, Cyber and Technical Glitches

The circular devotes significant space to technology risk. It prescribes:

• Mandatory system audits (annual for all, half-yearly for algo users) with detailed Terms of Reference for Type I, II and III brokers, covering RMS, password/security controls, BCP/DR, cloud usage and IT governance.
• Robust testing and approval framework for trading and risk software (IBT, DMA, SOR, algo, etc.), including mock/simulated testing, UAT, system auditor certification and exchange approval before deployment.
• A structured framework for “technical glitches” – immediate reporting, preliminary incident reports, RCA within 14 days, capacity planning (1.5x peak load), automated monitoring, LAMA-based exchange oversight, and financial disincentives.
• Mandatory adherence to IFSCA’s Cyber Security and Cyber Resilience Guidelines, following proportionality based on scale and interconnectedness.

The annexed templates in Annexure 4 (pages 62–63) standardise preliminary and follow-up system audit reporting formats, including risk ratings, RCA and corrective actions, improving audit comparability.

5. Governance, Outsourcing, Complaints and Change in Control

Brokers/CMs must adopt an internal outsourcing policy before operations begin, comply with IFSCA’s complaint handling and grievance redressal framework, and follow strict timelines for quarterly reporting and annual compliance audits (by CA/CS/CMA or equivalent foreign auditor). Any change in control requires prior approval (for IFSC-incorporated entities) and detailed disclosures on shareholders, fit & proper status, litigations and complaints.

6. Surrender and Security Deposit Refund

A structured process is laid down for surrendering registration, including declarations on investigations, fees, records and investor complaints. Security deposits are refunded by the exchange after a cooling-off period of 6–12 months, depending on whether the broker was client-facing or only proprietary.

Why this matters for you

For IFSC entities, CFOs, compliance heads, and intermediaries serving global capital flows through GIFT-IFSC, this Master Circular is now the single reference for licensing, conduct, tech governance, audits and exit. It tightens risk controls while giving operational clarity for cross-border business.

Nexpective Advisors is your trusted partner in GIFT IFSC regulatory and advisory services. If this update affects your operations, we’re here to help you stay compliant and proactive.