Great migration: forex companies moving from offshore to Russia
2015 was an era of change for the Russian Forex segment. Offshore registration will be outlawed. And the activities of brokerage organizations will be subject to licensing.
Deoffshorization of the Russian economy is in full swing. And after the representatives of big business and officials before the choice to work legally or go into the shadows, there were forex brokers (brokers.ru/brokers/landing) and dealing centers. After all, it is in 2015 that the law, which many representatives of the financial market have been waiting for more than one year, comes into force – this document regulates the position and status of forex companies under Russian law and establishes a new procedure for brokers.
Following the lower house of parliament, which adopted the law at the end of 2014, it was adopted by the Council of Federations and the President – information about this appeared on the official website of the government on December 30. Amendments and additions were made to the three existing laws governing financial activities in the Russian Federation.
What changes await the Russian segment of the Forex market in 2015?
In fact, the introduction of regulation in the non-banking financial market means one thing: from the category of speculation and shadow trading activities forex trading will become a legal player. Moreover, the activities of forex brokers in this case will be even more closely monitored by regulatory authorities than the work of their colleagues who trade securities professionally.
Changes in the legislation introduce a direct ban on establishment of dealerships related to the Forex market by legal entities that are tax residents of countries that do not have an agreement on data exchange related to financial activities with Russia. Thus, one of the main problems existing in the Russian segment of Forex is eliminated – tax evasion due to the choice of non-residents of the Russian Federation as founders.
In addition, the innovations in the legislation will also touch upon the issues of money storage and customer service by Forex dealers. Now all settlements will be made only through Russian financial institutions, and the software and hardware used in the course of trade will have to be placed in the territory of the Russian Federation. Such measures will undoubtedly ensure legal protection of clients’ interests and guarantee them the possibility of reimbursement of funds in the event of bankruptcy of a broker or other actions resulting in the loss of investment capital.
The work of Forex dealers in Russia, according to the changes made to the legislation, now falls under the list of licensed types of professional activities
Changes and availability of own funds necessary for Forex dealers’ activity were touched upon. Thus, the minimum amount of the brokerage organization’s capital in this case should be not less than 100 000 000 000 rubles (against 35 000 000 000 for brokers who trade in the securities market). And if a certain threshold of attracted investments is exceeded (over 150 000 000 000 rubles), the dealer’s equity capital will have to increase proportionally to the available capital difference. In fact, this is how the government plans to reduce to zero the risks to customers associated with bankruptcy or fraud in the financial markets.
Another important point: forex dealers now have to join the specialized industry self-regulating organizations. This will ensure control over the compliance of contractual relations with the legal norms of the Russian Federation. A mandatory contribution of 2,000,000 roubles to the compensation fund will guarantee at least partial compensation of losses to clients affected by the bankruptcy of the brokerage company.
It should be noted that the largest Russian forex companies have already reacted to the innovations. And this reaction is quite positive. After all, by freeing the market from small speculators, the state allows those who are ready to play “open” to develop their businesses legally and openly.
But not all innovations cause enthusiastic reaction of Forex dealers already working in Russia. And, in particular, doubts are caused by changes in the volume of leverage (brokers.ru/dictionary/term/46) available to clients of brokerage organizations. However, for individuals – traders using the services of Russian brokerage companies, this volume was limited before by the ratio of 1:3. Now this innovation will be mandatory. And the leverage of 1:1000 or 1:500 can be forgotten. According to the law, the standard amount of borrowed funds used is limited by the ratio of 1:50 (50 borrowed rubles per 1 ruble of the client’s own funds). However, this “corridor” can be expanded to a ratio of 1:100.
According to experts, such severe restrictions may prove to be a serious obstacle on the way of the Forex market in Russia to deoffshorization. In fact, this puts a trader in a disadvantageous situation, limits the amount of possible profit. And this is despite the fact that in the EU or the U.S. regulators do not impose any restrictions on the amount of borrowing for brokerage organizations.
Legislative regulation of the Forex market will also affect the advertising activities of dealers. Thus, a warning about the risky nature of financial transactions will now have to accompany any advertising of Forex brokers’ activities. And on the sites of dealers’ organizations will have to appear reports that clearly demonstrate the proportion of profit / loss for customers.
What can we expect in the near future? Anyway, by 2016 all Forex dealers working in Russia will have to undergo registration and licensing procedures. Those companies that for various reasons will be found not to comply with the law will be forced to cease their operations. And this, first of all, will hit small and medium brokerage organizations, which are unlikely to have enough own funds to provide the necessary amount of authorized capital. And it will lead to a global redistribution of the market, in which large companies will gain a clear competitive advantage.