It is well known that Foreign Exchange trading is currently unregulated in the Russian Federation, however this appears to be set to change. The latest example of this move towards regulating Forex came yesterday, when CRFIN (the Center for regulating financial instruments and technology) announced that a legislative draft was going to be given a first reading in Russia’s state Duma. CRFIN a non-profit self-regulated organisation founded by Forex executives with the two main goals in mind, firstly lobbying to having OTC Forex trading included within Russia’s existing financial regulation and to set out standards and regulations governing members of the group. The organisation can claim some of Russia’s largest Forex brokerages as members including Alpari, TeleTrade, Exness and Forex Club. CRFIN is the successor to KROUFR which is one of Russia’s oldest industry groups, which has become less relevant since Alapri withdraw from the organisation at the end of April.

According to the announcement the draft approved for reading created with the support of CRFIN which seeks to establish over-the-counter Forex regulation, sets out the following proposed rules and regulations:

  • Forex dealers will be classified as licensed entities within the Russian Federation capable of holding customer assets and thus will be required to become fully licensed members of the DSRO.
  • Forex brokerages will have a minimum capital requirement of 35 million rubles, roughly $1.08 million at the time of writing. This is similar to MiFID regulations which stipulate brokerages have at least 750,000 Euros in capital.
  • Rules and regulations governing information disclosure, internal controls, risk management and dispute resolution.
  • The draft would also require that brokerages set out publicly available terms and conditions which clearly specify the dealers pricing and execution policy.
  • The draft also includes the ability for investors to have their claims against brokerages heard in court.

This is the latest in a long line of attempts to regulate the OTC markets in Russia. The desire to have regulation codified in law arises from the fact that the Russian OTC market has been plagued by a number of customer frauds and problems over the past few years, with the big brokerages wanting to see regulation codified in law giving their operations extra credibility while at the same time also reassuring customers. Whether the passing of the legislation will come any time soon remains to be seen, and those who follow Russian politics are likely to know that twists and turns can happen at every corner. This has to be a positive sign for the future of Forex in Russia and shows that the industry in the federation is becoming more established and recognized by authorities.

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