Breaking News: Suspense continues for Russian FX as regulatory bill torpedoes CFDs

The bureaucracy and legal wrangling continues…

Today, just one day subsequent to the Russian Duma (lower Parliament) having accepted the second reading of the Russian FX bill which sets forth the full criteria by which the FX industry in Russia will be regulated on a federal and official basis, Russia’s lawmakers have now ordered a third reading of the proposed bill, set for December 16 this year.

In issuing a third reading, this procedure prolongs the procedure further still, despite its acceptance by the official government yesterday, however according to the Russian legal, if the third reading is accepted, the bill will only require the signature of President Vladimir Putin in order for it to become law, invoking a comprehensive and binding set of legal parameters by which all FX companies must abide, propelling Russia into the territories of nations with developed FX industries such as Britain, Australia, Cyprus and North America.

Along with the scheduling of the third reading of the FX bill, the lawmakers today published the final version of the document, which was approved by the Duma yesterday.

The text clarifies some really important issues, including a ban on CFD trading in one of the biggest jurisdictions in the world. Such a move is the least to say surprising, given that imposing such hefty restrictions on the scope of instruments offered for trading to clients of FX brokers in Russia had not been mentioned before, marking a direction which counters that of many industry participants which are currently flocking to issue CFD trading facilities, and take Britain’s established CFD model to a worldwide audience.

One possible reason for doing this is the intent of Russia’s authorities to align the newborn regulations with those in the United States. This has already been reflected in the requirement to Russian FX brokers to be members of a self-regulatory organization, alike their rivals in the United States that have to be registered with the National Futures Association (NFA).

Clearly, Russia’s authorities are not prepared to allow any platform to be used other than those which facilitate spot FX.

Indeed, should the ruble remain as volatile as in recent times, ensuring that market participants only conduct spot FX may ensure stability compared with those wishing to purchase futures contracts involving a major currency and a very volatile ruble.

This aligning of Forex regulations may have to do with Russia’s ambitions to bolster the role of its national currency, which is, however, currently struggling under the pressure of falling oil prices. Boosting the role of Russia as a marketplace, aligning it with the US and enhancing the role of the Ruble on the international stage is a lucrative aim. Tough rules regarding trading software and infrastructure will be necessary to achieve all this, of course.

Supposedly, this has to do with the requirement in the FX bill that demands Forex brokers to have their trading software systems (including back-up systems) located in Russia.

Russia’s FX brokers will also face one of the highest capital demands in the world of at least RUB 100 million.

The leverage will also be tightly restricted at 1:50, with the Bank of Russia to be allowed to extend this to 1:100 in cases which it considers appropriate.

You can download the latest version of the Forex bill using this link .


Read Also: