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Whilst economic woes and stratospheric interest rates blight Russia’s ailing economy, ruble liquidity continues to dry up and the nation’s sovereign currency’s price fluctuations have been depicting graphs on trading platforms which would leave even the most forthright currency trader feint hearted.
Today, as the deluge of companies reducing leverage to negligible levels on ruble pairs and in some cases suspending ruble trading altogether, the Russian government begins to take a strict stance toward those wishing to speculate on currency markets in Russia.
Just one day after the long-awaited Russian FX bill was signed off after its third reading by the Russian Duma (lower parliament) and sworn into state law, thus providing a full set of legally binding regulatory parameters for the FX industry in Russia, Alexander Bastrykin, the head of the Investigative Committee, and one of Russia’s most senior law enforcers, has taken a draconian stance.
“The main issue for the stabilization of the economic situation in the country is to stop currency speculation on the market,” stated Mr. Bastrykin as he stated his proponency toward more criminal cases to be brought against speculators.
In these times of post-Soviet free market economics, the ruble is not subject to any capital control laws, and as a result, Russia’s prominent executing venue Moscow Exchange has spent the last two years refining its connectivity via point to point direct links to London and Frankfurt provided by Canadian venue-neutral infrastructure provider TMX Atrium, as well as new data center facilities and colocation in efforts to join the worldwide electronic markets as demand for ruble liquidity increased exponentially.
This is a contrast to the days of the Soviet Union, in which purchases of US dollars or other free market currencies by Soviet citizens was such a grave transgression that it was punishable by the death penalty.
Nowadays capital control laws are still in place in many nations such as Argentina, China and Venezuela but Russian traders enjoy the freedom of ability to trade in global markets.
Russian President Vladimir Putin was the first high-ranking official to blame speculators for destabiliztion of the ruble. In his address to the parliament a week ago, Mr. Putin called on the central bank “to take measures to make sure that speculators can no longer take advantage.”
In this address, he made his position clear in wishing to root out speculators by stating that “We know who those people are, and we have the means to rein them in. It’s time to use these instruments”, an address which harks back to the days of the cold war.
According to a report by the Wall Street Journal, when asked about the Investigative Committee’s proposal, central bank Chairwoman Elvira Nabiullina played down the possibility of legal cases against “speculators”.
“I proceed on the basis that criminal responsibility derives from a break of the law,” Ms. Nabiullina said, adding that the current legislation is sufficient to deal with possible market manipulation or collusion. Ms. Nabiullina said the central bank has initiated one such investigation, without elaborating.
Earlier this week, Sergei Shvetsov, the Bank of Russia’s first deputy chairman, also moved to calm market concerns, saying that “speculators are good for currency markets” as they help to smooth out market liquidity.
The question still remains as to whether Russia is yet ready to fully permit its populace to freely do global business on such a large and open market as foreign exchange, or whether its interest is to maintain control over its citizens.