What's next for Forex in Russia?

The recently adopted law regulating dealer activity in the forex market has created a great deal of buzz among traders and brokerage company executives.

This law has sparked rumors that most brokerage firms will simply be unable to obtain a license, meaning they will be liquidated.

Fear of losing money has forced a large number of traders to withdraw their funds and switch to companies under different jurisdictions.

The law itself will come into effect on January 1, 2016, so it's important to carefully consider whether it's worth risking your deposit with a company or simply withdrawing all your funds during this time of panic. Is this law really so detrimental to DCs and their clients, and what awaits the forex market in Russia in 2016?

So, looking at this issue piece by piece, we can confidently say that any government regulation of brokerage companies will protect clients (Russian citizens) from unscrupulous companies.

Moreover, for the first time in Russia, brokers will be forced to fulfill clearly stated obligations, such as transferring transactions to the interbank market, rather than engaging in capital manipulation within the company.

Thus, for the first time in the history of independent Russia, the forex market will become 100% transparent, meaning the number of unscrupulous brokers that have been mushrooming will decrease.

About the law itself

According to the law, all forex dealers must obtain the appropriate permit from the Central Bank of Russia, and by this time, they must also join the regulated organization RSO.

To join the RSO, brokers must deposit 2 million rubles as collateral, thereby creating an insurance fund. The broker's minimum authorized capital must also be at least 100 million rubles and must grow exponentially as client capital increases.

A minimum requirement for DC managers is two years of experience and the necessary permits for such activities. Even based on these minimum requirements, most analysts predict that no more than 10-15 companies will remain in the Russian brokerage market, with the rest either becoming subsidiaries of larger players or exiting the market.

On the illiteracy of the law

The most interesting thing is that, as of January 1, all brokers must be licensed. However, the law does not even specify the actual procedure for obtaining licenses, or specifically the procedure the Central Bank must follow to carry out this procedure.

Therefore, those who monitor the functioning of this law notice constant amendments to the provisions, which simply prevents it from making any real profit. Ultimately, it turns out that neither the broker has time to prepare for licensing, nor do the authorities themselves know how to conduct it.

There is currently no confirmed information about any brokers deciding to obtain a license. The law also stipulates a three-month transition period, so no pressure from the regulator should be expected on January 1.

A blow to customers

The law clearly states that the maximum leverage a broker can provide to a client is 1:50. Under these conditions, scalping and pipsing are out of the question.

Accordingly, all potential profit from working on the Forex market is simply leveled out, and for beginners with small capital, the market becomes closed.

Many argue that this is a blow to client greed, as it's precisely because of high leverage that many lose their money. Therefore, by reducing leverage , the number of clients who suffer losses will be significantly reduced, but I also think the number of clients willing to work under such conditions will also decrease.

Taxation.

Currently, clients themselves decide whether or not to pay taxes on their profits. Following the introduction of the law, all licensed brokers will become tax agents and are required to charge clients between 13 and 30 percent of their profits.

This approach isn't entirely fair, as taxation should occur after filing a tax return, which takes into account not only income but also deductions—expenses for medical treatment, children's education, etc. Clearly, it will be extremely difficult to reclaim prepaid taxes.
 
Would brokers really take such a desperate step?

Having understood why brokers aren't particularly concerned about this law, it becomes clear that no one intends to enforce it.

Most existing forex brokers are registered outside of Russian jurisdiction and already hold international licenses for exchange operations. Naturally, only a few are willing to deposit additional funds and obtain licenses, and then charge their clients taxes.
 
A good example is the gambling industry: after the law banning casinos was passed, they all successfully migrated to the internet.

So, what's the best choice in this situation?

The only ones who will adhere to the law are large banks already operating in Russia, or more precisely, large bank brokers.

For example, if you want to work exclusively with Russian banks and pay all taxes, then your best bet is a company like Nefteprombank .

If this aspect isn't particularly important to you, open an account with any dealing center, focusing more on trading conditions and experience than the company's location.