When FX licensing stalls: Russia’s c-bank approves only two Forex dealer applications in 2017

Maria Nikolova

The Forex licensing activity of the Russian “megaregulator” last year can be summarized as follows: two license applications granted, and two – rejected.

Russia got its Forex law late in 2014, with the hopes pinned on the sector getting rid of scams and attracting more clients thanks to its enhanced reputation and increased confidence in the brokers (or Forex dealers, as they are officially called in Russia). More than three years after Russia’s President Vladimir Putin signed the Forex law, it appears that the Forex industry in the country has stalled – at least in respect of the number of licensed entities offering their services to Russian residents.

Those who have been monitoring the situation in Russia are well aware that there are only 8 companies with Forex dealer licenses in Russia, including local giants like Alpari. The number is small – perhaps the single jurisdiction that has a similar size but fewer (licensed) Forex brokers is the United States. Importantly, the authors of the Russian Forex legislation saw the US securities laws as exemplary when drafting the Russian Forex law.

Russia’s progress in terms of new companies entering the Forex market is negligible. This is shown by official statistics published by the Russian central bank earlier today.

There are 8 licensed Forex dealers in Russia at present, the data show, and 7 of them are based in Moscow.

The activity of the Russian “megaregulator” with regard to Forex licensing can be summarized as follows:

  • 2 license applications granted;

  • 2 license applications rejected (no names mentioned);

  • 1 Forex dealer license modified.

The Bank seems to have focused its efforts on tackling Forex scams rather than on stimulating the entry of new participants in the Forex market. In February this year, Valery Lyakh, Head of the Bank of Russia’s Department for Countering Malpractice, was quoted by Russian newspaper “Rossiyskaya Gazeta” as saying that the regulator will soon publish the results of its probe into a number of illegal Forex dealers.

The entities in question have no licenses to offer Forex services in Russia and are targeting Russian clients using foreign websites. The damage caused by their activities exceeds several billion rubles.

Although countering the activities of these entities is difficult, the Bank of Russia has managed to transfer 142 cases of illegal FX companies to the prosecutors’ office last year. Mr Lyakh said that the Bank of Russia is seeking to accelerate and simplify the procedure for blocking of websites of scammers. There has been no particular result of these efforts, however.

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