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Fedai unleashes competition in forex markets - Views on News from Equitymaster
 
 
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  • Sep 29, 1999

    Fedai unleashes competition in forex markets

    According to newspaper reports, the Foreign Exchange Dealers' Association of India (Fedai) has decided to do away with fixed brokerage and service charges on foreign exchange transactions. Although this decision had been under consideration for some time now, the implementation was delayed due of the adverse fallout the move would have had on the smaller forex traders.

    The decision to deregulate the brokerage and service charges is a step in the right direction. It will ensure that customers (including banks and corporates) are able to minimise transaction costs as a result of the competition that is likely to be unleashed in the markets.

    Moreover, the move can be expected to lead to a rationalisation of the number of players in the industry. Despite the small size of the domestic forex markets, a number of forex firms have been in existence over the years. They had been supported by the minimum brokerage and service costs imposed by the Fedai. However, with this rule no longer applicable, larger brokerage firms will be able to leverage on their economies to offer better services at better prices. The smaller firms will either have to step up operations and match their larger peers in terms of pricing and services or consolidate operations by way of mergers and acquisitions or discontinue operations.

    This move will result in the development of a more vibrant foreign exchange services industry, which is a must as India moves towards becoming a larger player in the global economy.

     

     

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