Bank of Russia to Put Further Caps On Leveraged Trading

Leverage will be reduced to 30:1 but brokers may be able to start hedging against their clients again

Russia, a country that has already taken a number of steps to weaken its retail FX industry, is going to be reducing the amount of leverage traders can use again.

Speaking to Reuters, Olga Shishlyannikova, deputy director of the securities and commodity markets department at the Bank of Russia, said that they had been receiving complaints from loss-making clients and decided to act.

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Shishlyannikova claimed that the Russian central bank would prevent brokers from offering more than 30:1 leverage for retail clients. Currently, Russian brokers can only offer up to 50:1 leverage.

Accompanying these new restrictions on leverage will be “professional training” for FX brokers’ clients. What that training will entail, and whether or not it will be prescribed by law, was unclear from Shishlyannikova’s discussion with Reuters.

For the bitcoin fan-boys, Shishlyannikova’s comments also shone some light on the potential for cryptocurrency derivatives. She noted that such products could become available once there is greater regulatory oversight on cryptocurrencies.

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Bank of Russia vs. Offshore Brokers

Brokers will likely not be too concerned by the Bank of Russia’s newest rules. Only 1.75 percent of retail traders in Russia use Russian-regulated brokers. The remaining 98.25 percent all trade with offshore brokers.

Even brokers with Russian regulatory approval will ‘suggest’ that their clients sign up to trade with another entity, owned by the same broker but operating out of a different country.

Other comments from Shishlyannikova suggest that this state of affairs may be coming to an end. She said that the Bank of Russia would have “to block access” to brokers offering their services from abroad.

Catering to demand for high leverage isn’t the only reason brokers stay out of Russia. Companies are also unwilling to operate out of the country as regulation prohibits them from hedging against their clients’ trades.

Again, this may be coming to an end. Without being explicit or providing any timelines, Reuters noted simply that the Russian regulator is “thinking about allowing hedging for forex dealers.”

From the perspective of brokers, all of this could be seen as one step forward and two steps back. An easing of hedging rules would make brokers’ business operations more viable, but caps on leverage mean that traders just aren’t going to be interested in their services. Unless the Russian regulator does block access to them, brokers are likely to stay offshore.

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