Despite the generally accepted opinion about the financial market of our country as the sphere of unregulated speculative trading, it is possible to invest in it legally and with minimal risk. But only if the bank Forex, where the role of a guarantor of transactions is not a dealing center or a company with an unclear status, but an officially registered financial institution.
The principal difference between this segment of currency trading and the “wild” trading zone is the presence of an official regulator – the Central Bank of Russia, which explicitly prohibits legal circulation of foreign currency funds to any organization, except for accredited banks. To get acquainted with the full list of the checked up banks you can study the section Rating of Forex banks on our portal.
What do you need to know?
All participants of the financial market providing brokerage services are divided into:
- private brokers;
- specialized brokerage companies dealing with securities and other assets;
- bank Forex organizations having a license for currency circulation.
And if the first two categories make up the lion’s share of market participants, the banks are not very active. Thus, the most famous of them are “Nefteprombank” and “Alfa-Forex”, although they are part of the banking groups of the same name, but still not directly related to them. These companies operate as ordinary dealing centers with registration in the offshore zone.
Are there fundamental differences between non-banking and banking Forex services? In fact, in both cases, all the principles of margin trading work in exactly the same way. The only difference between banking services is that they are regulated at the level of a state bank. That is, they give some guarantees to investors in case of bankruptcy of the brokerage company (in this case the bank) and allow avoiding overpayment of commissions and other additional charges.
Myths and reality about the work of the banks
Traditionally, the bank Forex in Russia is presented as “more reliable”, protected by some guarantees. But are there any real arguments in favor of replacing the usual dealing center with a bank?
There is an opinion that Forex brokers are a fundamentally different activity than “mythical” operations of ordinary speculators. In fact, the change of the name does not change much, because any activity on the exchange is the conduct of margin transactions, which are very conditional arrangements. Simply put, the investor provides the broker with a certain amount of money for “transactions” through the bank Forex – the so-called depositary account, which will be used for further calculations.
However, no one can guarantee how this money will be used in the future. The change of quotations in this case is quite conditional and directly depends on the bank dealer. And the trader’s winnings or losses also depend on the dealer against whom he actually has to play. That is, regardless of whether you work with a private broker or trust funds for trading activities in the bank Forex, but most often, it will have nothing to do with the conclusion of real trading transactions.
Actually, that is why the current legal norms classify all activities in the non-banking foreign exchange market as a bet – an agreement concluded on certain conditions.
Defense.. deposit banks and accounts
Depositors in Russia are accustomed to believe that all bank deposits up to 700,000 rubles are insured by the state, i.e. amounts up to seven hundred thousand will be guaranteed to be returned to depositors in any case. By entrusting their funds to banks providing brokerage services, investors believe that opening an account automatically guarantees them a refund in the event of bankruptcy or revocation of a license from a financial institution. Moreover, bank forex organizations gladly support this belief in their clients. In practice, however, the funds received from the client account to the trading account cease to fall under the category of deposits and lose the right to compensation for damages even within the limits of the amount guaranteed to depositors.
Real working conditions
The first and the most important thing to remember is that a bank forex broker allows you to avoid certain risks associated with the choice of service provider. Currency trading is not the only source of income for banks, and therefore the risk of bad faith or outright fraud is much lower here.
But in terms of information support and interaction with the client bank Forex organizations are still losing to dealing centers that provide services online. And the majority of settlements in the case of banks are carried out directly through the settlement and cash system and require the physical presence of the client in the bank branch to replenish the account or withdraw funds.
According to the current legislation, banking activity on Forex is taxed – any accrued income of a trader will be withheld tax on income of individuals in the amount of 13%.
Forecasts and expectations
In the near future, the main expectations of the bank’s players will be connected mainly with the introduction of state regulation of the extra-bank currency markets. The corresponding draft law on Forex banking in Russia has already been submitted to the State Duma for consideration. In this case, the very principle of speculative trading in currencies and other assets will no longer be regulated at the level of civil law, but will be subject to certain rules and regulations established at the state level.
In fact, this means that many private brokers, unlike banking institutions, will have to stop their activities. And investors will be able to pay attention to a more secure or, at least, clear market for services provided by financial institutions. According to the expert community, such an approach with the bank Forex will solve the main problem of trading: a huge number of bankruptcy cases, in which investors incur enormous losses.
The introduction of state regulation of non-banking currency markets will also solve the problem of one-day companies hiding behind popular ideas for fraudulent activities. Access to the Forex market will be simply closed for companies and brokers that are not bankers, do not have their own capital and do not bear financial responsibility to investors. It will give weighty advantages to the banks, which already now fulfill all the necessary conditions within the framework of brokerage activity.