Russian laws scare traders away

Publication date: 6 November 2019

Russian laws scare traders away

A recent survey conducted by the Financial Commission, an independent mediator on the forex market, provoked discussion in the professional community regarding alternatives to the existing regulation of the forex market in Russia with due consideration given to the current state of affairs.  

According to the survey, the vast majority of Russian traders (83.1% of respondents) are trading with offshore forex brokers. A small percentage of respondents is trading in Europe (4.3%) and the UK (5.7%). As experts suggest, this data indicates that regulatory mechanisms introduced in these jurisdictions hinder trade and market development.

Taking into account the number of forex traders in Russia, which, according to the latest estimates, amounts to about 400,000 people, it can be fairly assumed that about 332,000 Russians trade with offshore forex brokers.

• 65% of respondents are not ready to trade with Russian forex dealers

Russia’s forex community is dissatisfied with the existing restrictions. As a result, Russian traders prefer to open accounts with an offshore broker rather than with a Russian one.

Only 19.7% of respondents are ready to open an account with a Russian forex dealer while more than half of respondents (65.3%) won’t trade with a Russian forex dealer unless some regulatory changes take place.

• Only 8.5% agree with categorization of investors

Respondents are strongly opposed to the state’s initiative to restrict access to forex trading for some categories of investors. Investors will fall into different categories depending on their financial resources, trading experience, and education. Only 8.5% of respondents agree with this type of restrictions and the way investors will be classified.

• 30% of respondents prefer trading with 1:400 leverage

Almost half of respondents also think that acceptable leverage ratio should not exceed 1:100. At the same time, over 30% of respondents prefer trading with higher leverage, up to 1:400.

Awareness of financial risks is an important indicator of financial literacy in the country.

• Over 75% of Russian traders think CFDs are an important instrument

CFD (Contract for Difference) trading is important for the Russian forex community. Over 75% of respondents say that CFDs are one of the key instruments in their financial strategy.

CFDs allow traders to avoid significant trading costs and increase their purchasing power compared to traditional assets trading. Traders can speculate on, for example, gold prices without actually owning physical gold.

Forex trading conditions in Russia come into conflict with expectations of Russian traders

The survey conducted by the Financial Commission showed clearly that excising trading conditions on Russia’s forex market come into conflict with expectations of Russian traders, and most of them want to trade with licensed forex brokers in jurisdictions which are more free from restrictions. At the same time, the Russian forex community is quite well aware of risks associated with forex trading and ready to trade with lower leverage. The majority of respondents, however, believe that the classification of traders which was proposed in order to impose additional restrictions is no-good. It becomes obvious that Russian legislators should pay more attention to the needs of ordinary Russian traders. Due consideration should be given to the current regulation of Russia’s forex market and amendments which were proposed by the Bank of Russia given the fact that Russia is aiming to attract investor capital as part of its agenda on financial sector development and economic growth.