Western governments have responded to the Russian invasion of Ukraine with a barrage of economic sanctions. The major one is the European Union’s ban of seven Russian commercial banks from accessing the inter-bank messaging network, SWIFT, which is used for cross-border payments transfer.
The sanctions have not only affected business in Russia but also foreign companies that are providing services in Russia and having Russian clients. But, are forex brokers affected?
Well, foreign forex and CFDs brokers did not face any direct impact from the sanctions. But, the plummeting ruble and other Russia-linked company shares have forced the brokers to monitor the situation closely and take immediate steps.
Indeed, all the sanctions have deeply affected the value of the Russian ruble, which has plunged by around 35 percent against the US dollar in the past few weeks. Though RUB pairs are not among the top currency pairs being traded on the brokers, the volatility of the currency has alarmed the brokers.
Almost all the forex brokers were quick enough to change the trading conditions of the RUB pairs. Some put RUB pairs on close-only, while many have suspended RUB trading indefinitely. Forex.com, Dukascopy, Alpari and FXOpen were only a few names among these brokers.
However, a few brokers, including IG, continued to facilitate RUB trading but have increased the margin rate to 100 percent.
“The situation in Ukraine and its global ramifications are fluid and fast-changing. We’re continuously monitoring developments in financial markets and shifting legal and regulatory obligations worldwide,” IG stated. It even took similar steps for the CFDs trading and spread betting of a long list of the Russia-linked company shares.
Removing Russian Clients
That's not all. Many brokers, which are providing trading accounts with RUB as the base currency, have stopped offering such accounts. Alpari notified its clients earlier this month that it will convert all RUB accounts to USD accounts.
“We are no longer offering Ruble-denominated accounts, and we will be taking action to convert all accounts that are currently denominated in Ruble to USD this week,” Alpari wrote in a notification email. “In order to make this change, we need all open positions on your account to be closed.”
JustForex was another forex broker that recently terminated all its relationships with clients not only in Russia but also in Belarus, the country which is acting as Russia’s ally in the invasion.
“Firstly, our company has decided to terminate all relationships with clients from the Russian Federation and Belarus. Opening new accounts for clients from these countries is prohibited,” the broker said in a statement.
Local Forex Brokers
Though many foreign forex brokers take Russian clients, the country has a small locally regulated market of forex brokers. But, the Central Bank of Russia only licensed four brokers to operate in the country.
Unlike foreign brokers, local ones in Russia have been directly impacted by the western government’s sanctions. VTB Capital Forex, which is one of the four licensed Russian foreign exchange dealers, suspended all trading on February 25 indefinitely.
In addition, it was the bank that felt the strongest impact as it received all market quotations from its parent VTB Bank, which is one of the most heavily sanctioned Russian lenders now.
“The company, together with VTB Bank (PJSC), is currently developing a procedure for eliminating or minimizing the negative consequences of anti-Russian sanctions measures. The Company will resume trading operations in the near future,” the broker said.
Alfa Forex, another regulated Russian forex dealer and a subsidiary of Alpha Bank, put RUB pairs against USD and EUR earlier this month after it warned against a wide market spread that reached a critical level. But now it is considering to resume their trading again. However, it will increase the margin, keeping the leverage at 1:10.
Furthermore, Russia’s Association of Forex Dealers (AFD), which is a self-regulatory body, has taken steps to bring relief to the local forex brokers. It has suspended all control checks, including unplanned inspections of the member Forex dealers, until May 11. To further reduce operational burden, the self-regulator allowed members to operate without submitting any accounting resorts.
