Participants of Forex market in Russia freeze in expectation of the first law, regulating relationship in the sphere. What will it bring for traders and investors? Will there become less kitchen-type companies and dishonest schemes or does it simply mean that the government wants to take strict control over highly profitable modern sphere of business, created by the effort of private parties and companies? We have tried to find answers to these and other questions together with the member of Expert Advisory Council at the Federal Committee on Budget and Financial Markets Andrei Lukianskov.
By the way, Andrei Michailovich is not simply a representative of legislative power of the Russian Federation, but also the person who is deeply aware of Forex market issues and a Director General of Panteon Finance company.
Regulation Expected for Over 15 Years
In our conversation Andrei Lukianskov has reminded that talks on necessity for regulation of OTC markets have been held almost from the very beginning of active development of the business. At the end of 90-s everyone was expecting the Russian Federation to set statutory rules; however, it has all ended with mere rumours. As a result, dishonest dealing centers have felt at ease in the territory of the RF, and their abuse, experienced by ordinary traders, has become a common occurrence at Forex.
According to our interlocutor, the issue has lately become a burning one. Having tried hand at electronic currency trading, many citizens have, unfortunately, gained negative experience. This has influenced the reputation of entire branch. No regulation of Forex market in Russia has become one of the main factors restraining its development. If the government continued pretending not to see the problem, the most liberal and available to the general public sector of financial activity would be written off in the nearest future.
“We have faced a situation when there has arisen a necessity to protect the interests not only of private consumers, but also responsible market participants – organizers of trading,” claims Andrei Lukianskov, “by the way, state interests also remain unprotected. And this concerns business with a turnover, which amounts to many billion dollars.”
Therefore, the regulator that is at the edge of appearing in Russia is to fulfill the following tasks:
- create transparent and clear system of Forex market in Russia;
- protect the interests of private parties – participants of Forex market in Russia;
- provide responsible market participants with the opportunity of long-term, open, and expected activity, which is impossible without legal framework;
- eliminate the grey zone of unconsidered financial flows and profits and create the mechanism of regulating laundering money and skimming without doing harm to the sphere in general.
“Who is the Judge?”
Problems, discussed by the specialists, are widely known. And there is no doubt that they are to be solved. However, representatives of companies, as well as ordinary traders, fear that the quality of the legal action to be taken will not be the highest. Unfortunately, the history of Russia has numerous examples when good intentions have turned into new problems.
Andrei Michailovich has dispelled our doubts by saying that the legal framework is being developed directly by the members of Expert Advisory Council, which, in its, turn, consists of several specialized expert councils, whose employees include only experienced professionals in one or another sphere of financial activity. Forex, for example, is dealt with by the Council on OTC Financial Markets. As a part of it there has been created a competent financial services commission, the purpose of which is to develop standards for Self-regulated organizations (SRO). In the nearest future entering SRO will be obligatory for all brokers of OTC market.
As admitted by Andrei Lukianskov, the Expert Council is taking active part in project development of the Federal Law No.363920/6 “On derivative market and activity of broker operators on OTC financial markets of the Russian Federation”. This document will become a legal framework for regulating several segments of OTC market, including Forex.
What will Change when the Law is Adopted?
First of all, as supposed by experts, only legal operators will provide broker services at Forex market in Russia. Activity of those brokers, registered no one knows where and regulated no one knows who, will be beyond the law.
According to the official definition, being a Forex operator is entitled to a legal party, resident of the RF or a physical party, resident of the RF and registered as a private entrepreneur. Only such subjects may do agency business between clients and liquidity providers, as well as give access to operations on margin derivatives trading.
“Every broker is to be a member of one of specialized operators regulating organizations,” highlights Andrei Lukianskov, “entering SRO is to become a more complicated procedure than, for example, opening an operating account in a bank. However, all forex-operators will be obliged to hire specialists that have passed qualification examination and received a corresponding qualification certificate in the Financial Certification Center. The deadline for receiving such certificates is July 01, 2015.”
According to the norms of the draft bill, SRO may be entered only by organizations that have perfect business reputation and provide all information about themselves, including financial statements, at first request. Besides, forex operators will become tax agents and will charge PIT on their own. As informed by Andrei Lukianskov, tax basis at Forex is slightly different from the one set at stock market. It is calculated by the principle of the difference between input and output of client’s means from a trading account.
Item 2 of article 23 of the future law states that organizations, which have failed to enter SRO of specialized operators, do not have the right to perform activity. In case of its performance, they bear responsibility in accordance with the current legislation.
“Therefore,” concludes Andrei Lukianskov, “adoption and implementation of the draft bill will result in the fact that Forex market in Russia will include only responsible participants, who will be controlled by SRO. As a result, the rights of ordinary traders will be protected, companies will do their business by the clearly set conditions and plan their activity for a long-term perspective, and the country will receive an instrument for effective fight with laundering money and non-payment of taxes.”
