New version of Russia’s FX bill released, capital and software rules remain controversial


Earlier today a new version of Russia’s FX bill, which still awaits its second reading by lawmakers, appeared on the site of the State Duma. The revised text envisages even tougher maximum leverage restrictions, leaves in place the super-high capitalization requirements for Forex brokers and although partially relaxes the rules for trading software, keeps them quite controversial.

The latest version of the document says that maximum leverage for Forex trading should be 1:50, which is two times harsher than the 1:100 limit proposed in the previous version of the bill only a couple of weeks ago. CRFIN, the Forex self-regulatory organization in Russia, has been advocating the more relaxed approach to leverage and the 1:100 cap. An advocate of more radical restrictions is Sergey Shvetsov, first deputy governor of the Bank of Russia. He has been pushing for a 1:50 cap for quite some time and now his demands are beginning to materialize.

This brings leverage restrictions in Russia in line with those in jurisdictions with mainstream FX  regulators such as the CFTC in the United States. Still, this restriction make sense when it comes to protection of consumers from losing quickly all of their investment.

Next up is the capitalization demand, which will leave most FX brokers disappointed. The minimum own funds that a company should have to obtain a license of a Forex dealer in Russia is RUB 100 million (USD 1.9m), with the sum to be bigger for companies that have client assets under custody whose value exceeds RUB 150 million.

The new version of the text is more lenient to foreign companies who wish to offer their services in Russia. They will simply have to obtain a license as Forex dealers from the Russian regulators, complying with the same requirements as their Russian rivals.

Software requirements got a bit relaxed in the new version of the bill, with the most alarming  part having been removed from the text. The previous version of the document demanded from all FX dealers in Russia to actually own the software and all of the technical equipment used for trading. The requirement is no longer present in the bill, likely due to the lawmakers having that what they ask for is physically impossible as most FX brokers do not own but license their trading technology.

A controversial requirement regarding software, however, remains in place. Forex brokers will be obliged to have a back-up of all their trading equipment located in Russia. How exactly this requirement will combine with the use of products which operate outside Russian jurisdiction such as VPS is most certainly a conundrum.

All of the documents regarding the second reading of the bill are now ready and waiting for the signatures of those responsible. The decisive vote is set to take place on December 9, 2014, with the law to come gradually into effect. Some parts will become effective as early as January 2015, others – later in 2015 and in 2016.

You can read the latest version Russia’s FX bill by clicking this link

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New version of Russia's FX bill released, capital and software rules remain controversial

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