By Sandeep Parekh
On August 12, the International Financial Services Centres Authority (IFSCA) released a circular titled “Regulatory Framework for Global Access Providers”. The circular marks a key step towards clarifying the regulatory framework around global access providers (GAPs) and sets the tone for the next phase of investments through IFSCs.
Historically, Indian investors relied on foreign brokers operating outside the purview of domestic regulators to invest in foreign securities, thereby raising concerns over transparency and investor protection. To address this, the IFSCA introduced the concept of GAPs in 2021. GAPs are intermediaries authorised to facilitate access to global financial products and services through regulated international exchanges and foreign brokers. Initially, only IFSCA-registered broker-dealers and recognised stock exchanges could access overseas markets, either via cross-border arrangements with regulated entities or by registering as trading members of foreign exchanges (limited to proprietary trading). For broker dealers, such access required a no-objection certificate from the recognised IFSC exchange.
On April 17, the IFSCA (Capital Market Intermediaries) Regulations, 2025, were notified. They revamped the framework for the regulation, registration, and supervision of capital market intermediaries operating in IFSCs. The IFSCA consequently chose to further deliberate on how entities in IFSCs provide global access and if the status quo should be maintained.
On May 8, the IFSCA released a consultation paper seeking public comments on certain proposals in relation to GAPs (CP 1). The key objective of CP 1 was to introduce clear rules on the registration of GAPs, provide operational modalities, detail permitted products, and responsibilities of broker-dealers, to define client disclosures, know your customer/anti-money laundering/combating the financing of terrorism compliance, code of conduct, periodic reporting, fee structures, and other regulatory requirements.
CP 1 faced criticism for its narrow eligibility criteria for GAP registration. It allowed only subsidiaries of recognised stock exchanges or foreign brokers with IFSC subsidiaries to act as GAPs, effectively excluding IFSCA-registered broker-dealers. This created an uneven playing field. While foreign brokers with group entities holding overseas memberships could offer market access directly, IFSC-based broker-dealers without such memberships would be forced to route access through other GAPs. The framework was thus seen as restrictive and disadvantageous to domestic participants.
To rectify these defects, on May 30, the IFSCA published a revamped consultation paper (CP 2) that introduced several key changes. The most significant change was broadening the definition of GAPs to allow IFSCA-registered broker-dealers to seek registration as GAPs, provided they enter into formal arrangements with foreign brokers that are trading members of a foreign stock exchange to facilitate global market access. This significantly widened participation and would effectively create greater opportunities for investors to diversify globally through regulated channels.
CP 2 was subject to further comments from the public. In this regard, industry participants identified a major issue concerning the selection of foreign brokers with whom GAPs could enter into agreements. According to CP 2, a GAP was permitted to enter into an agreement only with a foreign broker who was registered as a trading member of a stock exchange in the relevant foreign jurisdiction and who complied with the regulatory requirements of that jurisdiction for providing access to stock markets. This regulatory approach created several challenges, particularly when compared with international practices. For instance, in jurisdictions such as the US, the concept of a “broker-dealer” is distinct from that of a “trading member”. A broker-dealer is primarily licensed to engage in securities trading and investment services for clients, whereas a trading member (often referred to as a member of an exchange) is focused on direct participation in the exchange for execution of trades. A broker-dealer is capable of providing multi-dimensional access to the markets in a foreign jurisdictions through tie-ups with various trading members. For example, a Financial Industry Regulatory Authority-registered broker-dealer could have tie-ups with trading members on NYSE, NASDAQ, etc., and act as a single point of contact in the foreign jurisdiction concerned for the GAP. However, it was effectively excluded from entering into agreements with GAPs.
The circular on August 12 identified the issues surrounding this restriction and eased them considerably. A GAP may now enter into an agreement to provide access with any foreign broker that is duly regulated or registered as a broker (by whatever name called) in its home jurisdiction, provided that such broker offers access to global markets in compliance with applicable laws. Thus, the requirement for the foreign broker to also be a trading member of a stock exchange in the foreign jurisdiction concerned has been done away with. Importantly, foreign brokers are now permitted to further extend access to multiple jurisdictions through their own arrangements, thus enhancing flexibility and broadening the scope of market access available to investors.
The evolution of the framework around GAPs reflects the progressive approach adopted by the IFSCA. This steady regulatory deepening highlights the IFSCA’s dual commitment—to ensure adequate supervision while promoting and developing IFSCs as a global investment hub.
The benefits of this revamped approach are significant. First, it is likely to encourage more Indian entities to establish broker-dealer operations within IFSCs, thereby deepening the ecosystem and positioning India as a credible player in cross-border financial services. Second, it provides Indian investors with a transparent, reliable, and regulated alternative for accessing global markets, moving decisively away from earlier unregulated routes. Third, the framework enhances regulatory oversight over the deployment of funds overseas, thereby strengthening investor protection and reducing risks. Finally, by aligning with global best practices, the framework is expected to improve service standards, enhance investor experience, and foster higher quality intermediation in outbound investment channels.
Only time will tell how much capital will be channelled through GAPs, but industry response so far has been largely positive. The hope is that this framework will encourage greater investment through a regulated and supervised route. Its ultimate success, however, will depend on how the IFSCA shapes the regulatory framework, striking the right balance between ease of doing business and investor protection.
The author is Managing partner, Finsec Law Advisors. Co-authored with Aniket Singh Charan, associate, Finsec Law Advisors