Russian lawmakers postpone second reading of FX bill – again

One of the biggest jurisdictions in the world is still without a Forex law, as lawmakers remain reluctant to discuss the Forex bill.

The second reading of Russia’s Forex bill, which was supposed to be finally held yesterday, got postponed again. A protocol from a meeting of the Council of the State Duma (the lower chamber of the Russian parliament) says that the vote is deferred for a later date in the future.

This marks the eighth time the second reading of the bill has been put off – the document has been stuck in the Duma for more than 17 months after it obtained the precious nod of approval at its first reading in the summer of 2013.

The reasons for postponing the vote again have not been specified although we can speculate about them given that the text of the bill recently underwent thorough revision. The amendments include:

  • Tightening of minimum capital requirements. To obtain a Russian Forex broker license, a company should have a minimum net capital of RUB 100 million (USD $2.1 million). The sum increases for brokers which hold large amounts of client funds.
  • Restricting maximum leverage to 100x.
  • Demanding that Forex brokers actually own their trading software.

DumaRegarding these new requirements, we can assume that the restrictions on leverage will hardly cause a debate. For that matter, we can recall that Russia’s Forex self-regulatory organization CRFIN has recommended a maximum level of 100:1 for the leverage too. And this number seems to be an acceptable level for regulators and industry representatives.

The other two amendments, however, have already sparked heated arguments. For starters, a minimum capitalization of RUB 100 million runs counter to the law “On the Securities Market”, which demands Forex brokers to have a minimum capital of RUB 35 million (about $750,000), as do all Russian securities dealers. Moreover, the Bank of Russia has approved a normative act that cuts the capital requirements for all participants in the securities market. According to the latter document, Russia’s FX brokers will actually enjoy a record low capital requirement.

The demand regarding the FX software is also controversial, given that FX brokers do not usually own the software but buy licenses for it. Beyond software, another requirement is that all technological equipment related to trading should be located in Russia. This raises a number of issues with VPS, to give an example.

It could be that debates around these problematic amendments have caused the second reading to be deferred again. On the other hand, factors behind the postponing could be purely bureaucratic – this may well be the case if we consider that the next date for the second reading is November 21, 2014.

If the bill manages to complete its journey through the Russian parliament by the end of 2014, it is set to become a law in March 2015.

You can find out more on the current situation of Russia’s Forex bill by following this link.

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