Forex law Consequences for the market


Today, during the financial crisis, the number of players on Forex market in Russia increases, as well as number of the operations made by them. Due to the unstable situation and sharp, unpredictable currencies rate fluctuations this segment of the financial market becomes more and more attractive to the risk lovers.

Most of beginning traders consider that Forex is the international market where everything is most transparent. And though at the international level it functions as the market of interbank currency exchange at free prices and it is presented by large companies making transactions from 1 million dollars, but for small players it differs considerably: the main dealers on the market tries to attract ordinary citizens who trade among themselves. And though it seems to the clients that they work at the international foreign exchange market, actually all operations are made in the company.

The game on the Forex market can remind a casino: any prize of the trader is a loss of the dealer and vice versa. Organization of the auction in the company only allows Forex dealers to deceive successful clients. Trying to secure themselves against losses, swindlers resort to various tricks such as market quotations distortion in own favor, communication breaks imitation, client applications falsification, false newsworthy events creation and other.

However most of the beginning players more often quickly lose all invested money not because of roguish actions from dealers, and owing to the inexperience and then address to various organizations for the situation settlement. So, during 2015 monthly about 35 claims including the largest dealers on the market (Alpari, Teletrade etc.) came to the Commission for regulation of the financial market participants relations (KROUFR). At the same time many complaints about "short-lived companies" arrived: simple limited liability companies with the minimum authorized capital which disappeared also easily as well as appeared.

For the protection of Russian citizens rights and implementation of the market regulation in 2015 the Central Bank of the Russian Federation adopted the law about Forex which has come into force on October 1 last year. To become a licensed Forex dealer in Russia, the company needs to have available funds not less than 100 million rubles to enter a self-regulatory organization (SRO) of Forex dealers and to contribute 2 million rubles to its indemnification fund.

However when the law entered into force on the Russian Forex market an ambiguous situation was created. The matter is that in Russia there are no any SRO Forex dealers registered, therefore actually all Russian Forex dealers are "beyond the law". Besides, the provision of the law concerns only the companies registered on the territory of the Russian Federation, at the same time the companies of other jurisdictions still have the right to carry out activity in Russia (however without services advertizing possibility). It has led to the fact that a part of Forex dealers in Russia went into liquidation, and the other part has completely gone to the offshore. Large Russian players also used this opportunity during the transition period until they obtain the license in the Central Bank of the Russian Federation and the SRO is created. At the moment they work with the Russian clients by means of foreign structures (for example, Alfa-Bank which opens accounts in the Cyprian branch, or Alpari the leader of the market (Saint Vincent and Grenadines)).

And if large Russian Forex dealers and their obligations execution are undoubted, then care should be exercised in work with other foreign companies on the market especially as negative experience examples exist. In particular, in October, 2014 it was reported about cases of money loss among the clients of the Ukrainian broker MMCIS Group: the company at first has limited, and then has stopped money delivery to the clients including which 50 thousand Russians according to TsRFIN.

And still, despite creation of various conditions for protection of the Russian Forex dealers clients interests, there is a probability that most of the Russian citizens playing on Forex in future will use foreign jurisdiction companies services more often. It is caused by creation of obviously noncompetitive leverage offer (relation of borrowed capital to the amount of own funds) compared to the foreign companies: in Russia its size should not exceed 1:50 (or 1:100 by the special resolution of the regulator). So, for example, in Japan establishment of rigid restriction of 1:25 leverage has led to the fact that Forex market in this state almost dissappeared: the Japanese use services of Forex dealers from other jurisdictions.

Russian dealers on the Forex market would like to increase the leverage to 1:200 to increase their appeal in the long term, to allow trade not only currency pairs, but also other financial instruments, and also to expand ways of account replenishment and to allow registration of accounts to a certain level of the deposit online (without need to visit the office or to get a digital signature).