Russia’s “Megaregulator” to treat Forex brokers as medium securities market participants

Maria Nikolova

The new classification, included in proposed amendments to Russia’s “Federal Law on the Securities Market”, takes into account the risks associated with a given securities market participant operations.

The Russian Forex market has only recently started to budge, with licensed Forex brokers (or Forex dealers, as per their official designation under the Russian law) reporting the signing up of the first clients of their Russian businesses. The red tape for them, however, is growing every day, as has just been proved by the Central Bank of Russia.

The “Megaregulator” has earlier today published a consultation document, which envisages changes to the “Federal Law on the Securities Market”. Under the proposals, all professional participants in the securities market will have to define their category: small; medium; large or systemically important.

Forex dealers, however, do not have to study the criteria for picking a category. They will automatically be placed in the “medium” category. This is not necessarily a piece of bad news, as this frees Forex dealers of some extra requirements concerning internal auditing. The latter will apply only to large businesses (and systemically important ones). The placing of a business in the “medium” category, however, implies tougher requirements regarding the number of employees that have to be hired for performing various functions. There are no details in this respect at this point, however.

Why is the “Megaregulator” pushing for this additional classification of securities market participants? The authors of the project specify that these labels reflect the level of risks arising from the operations of each securities market participant. The idea is that businesses associated with higher risks will have to face tougher licensing and reporting requirements.

The consultation on the latest proposals by Russia’s central bank closes on June 19, 2017.

In the meantime, the number of licensed Forex dealers in Russia remains at humble 8, with the latest addition to the list being PSB-Forex, a Promsvyazbank company. The law requires that a licensee maintains a minimum net capital of RUB 100 million. There are also leverage restrictions – the leverage cap is set at 1:50.

The Russian Forex market has sparked the concerns of the Federal Antimonopoly Service (FAS). The body plans to introduce changes to normative acts, which aim to prohibit the soliciting of clients in the Forex market by entities that do not have Russian Forex dealer licenses. The prohibition will apply to educational centers of unlicensed Forex entities too.

The document, set to be ready by the third quarter of 2017, will be addressed to the Bank of Russia and/or the Russian government.

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