Regulatory organizations at the Forex market
OTC foreign exchange markets are a pressing problem for the world economy. On the one hand, the trade turnover of even one large site makes up a considerable share in the investment “pie”. On the other hand, it is virtually impossible to regulate speculative trading based on exchange rate differences. That is why the regulatory organizations at the Forex market even today in most cases replace the officially operating systems of state control over the movements of foreign exchange markets. Who is the regulator, then? In fact, almost every country in the world has found its own solution to this problem. And the geography of the Regulatory Agencies (ROs) seems quite extensive, and you can see for yourself by going through this section.
Forex Regulators: Foreign Experience
The most significant experience in regulation of the Forex market is in the USA. There are several regulators here, the main ones being NFA (National Futures Association) and CFTC (Commodity Futures Trading Commission) is an organization founded four decades ago and, in fact, is an independent version of the federal agency. It should be noted that it is in the U.S. that market regulators have the greatest influence on forex traders, setting restrictions and bans on some aspects of their activities. But despite such unpopular measures, North American associations, in particular NFA, have the greatest authority in the trading world.
The UK market also has its own regulator, the FCA. And since this state is a member of the EU, it is most often addressed to it to resolve various disputable or fraudulent situations in the foreign exchange market, recorded in the course of over-the-counter foreign exchange trading in the Old World.
However, the Forex market in one way or another is regulated in any country – even if it is purely nominal. You can find the full RO catalogue here.
Forex Regulators: How are we?
As for the Russian Federation and the CIS countries, everything is much more complicated here, since forex trading is legislatively shifted beyond the scope of activities subject to state regulation. By default, it does not seem to exist, legal disputes are settled on the same terms as a bet. Brokerage activities in this area are in most cases conducted under the strange term “provision of information services”.
If to consider the existing organizations as capable to regulate the situation in the currency markets, the Federal Financial Markets Service (FFMS), which was replaced by the Bank of Russia’s Financial Markets Service, was the closest to it by its purpose. But it is in the absence of a clear legal framework that the Forex market simply does not fall under its sphere of influence. Starting from March 3, 2014, the Financial Markets Service of the Bank of Russia was abolished
There are also “private” regulators in the Russian market – CRFMM, CRFMM and others. But, as a rule, they work in direct contact with a rather narrow segment of the market and do not cover it entirely. And any recommendations of such regulators are optional.
However, the most important regulator of any financial issues in the Russian market is the Central Bank. It is he who controls the activities of banking organizations that provide a number of brokerage services to their clients. And allows to solve any disputable situations at the official state level.
Forex Market Regulation: Expectations and Prospects
It should be noted that the Forex market has long been the object of close attention from numerous Russian officials of the highest rank. And in the near future, it is expected that the law will be adopted, which will finally help to clarify the activities of traders, brokers and over-the-counter turnover of foreign currency funds, in general.
In 2013, the State Duma of the Russian Federation has already considered in the first reading the draft law on regulation of foreign exchange markets and, in particular, Forex. But its final consideration was delayed due to the need for substantial improvement of the submitted documents. It is expected that the draft law will be reviewed before the end of 2014. And this means that traders have a chance to enter the new fiscal year with a new status and new opportunities. In particular, with the right to consider disputes regarding trading in the over-the-counter market within the framework of arbitration proceedings.
And, of course, the main purpose of the draft law is not just the appearance of mechanisms for regulation of foreign exchange markets, but the creation of working conditions in which unfair brokers simply will not have a place in the system. In particular, it is planned to create conditions for self-regulation of the market by creating a single organization for all dealers acting as intermediaries in the Forex market. A system of contributions will have to be put in place to pay the membership fee (about 30,000 USD) and monthly contributions (about 10,000 USD).
In addition, it is planned to create not only a single legislative framework, but also a fund that allows to protect the interests of traders from unfair behavior of brokers. The entrance fee to such a fund will be about 50,000 USD.
In the meantime, Brokers.ru offers its visitors an alternative opportunity to file a complaint against the broker. To get acquainted with the service – go to the section “File a complaint”.
Learn more about how to influence a dishonest company in the article “What gives a complaint against a broker?
However, already today the majority of large dealing centers are trying to adhere to a number of rules in the course of cooperation with their clients. And this serves as a mechanism for self-regulation of the market, which today is a fragmented structure that requires global legislative streamlining.
Learn more about the types of fraud brokers are involved in and how to avoid working with such companies in the article “Self-defense lessons: Forex fraud”