The Russian parliament has just passed the first Russian forex regulation bill on the second reading turning it into law. It is now official – Russia is on track on becoming a fully regulated market ensuring the protection of clients of OTC foreign exchange services and if not preventing, dramatically reducing the number of customers falling victims to questionable entities targeting the Russian market.
For the first time ever, the official business of forex dealers in Russia has been legally defined. According to the law, the services provided by forex dealers may only be provided by companies which are not banks or typical brokerages dealing with securities.
As promised, the regulatory environment is on the tough side with the leverage ratio set between 1:50 to 1:100. The Governor of the Central Bank, Elvira Nabiullina, has recently clarified that the bill has borrowed some provisions from US and Japanese regulatory environments.
The other major point worth mentioning is that CFD trading has not been included into the bill in any form, so forex dealers who are offering OTC foreign exchange trading to their customers will have to limit themselves with that. With the structure of the law providing flexibility this requirement can easily be changed in the future.
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The document already defines providers of OTC foreign exchange services as delivering derivatives contracts, or in legal layman terms they are CFD providers, but are only allowed at this point in time to price the instruments which they are offering based on foreign exchange rates.
The minimum capital requirement to get regulated in Russia is $1.85 million (RUB 100 million). However, if a brokerage’s clients holdings total more than $2.7 million (RUB150 million), the capital requirement grows by 5% of the client deposits sum above the RUB 150 million threshold.
A self-regulatory organization (SRO) of forex dealers is at the center of the Russian forex regulation law. An investor compensation scheme is being set up to reimburse investors in the case of bankruptcy of any of the members of the SRO. The members of the SRO will have to deposit about $40,000 dollars into the investor compensation fund separately for any charges related to licensing.
Just before the second vote on a draft proposal of the Russian forex regulation law, the biggest self-regulatory organization of forex dealers in the country issued a statement outlining the positives and the negatives of the bill.