The authority have revoked the licenses of some of the top brokers around, and the local Forex market is now non-existent. When you look towards the end of last year, you will see that the central bank of Russia, which do act as the regulator for the Forex sector, have wiped out the local FX industry.. When you look at the drastic move, it’s safe to say that the current state of the industry is not as good as it could be.
Forex trading is now trading more than ever in Russia, and even though the central bank are trying to encourage residents to diversity their investments, it doesn’t look to be having an impact. People are refusing to move away from FX and there is still a high demand in the country. When you look at the local market however you will find that it is non-existent. Most of the FX trading volume is actually coming from brokers who are not even regulated in Russia. This means that even though Forex trading is still very popular, people are for some reason not choosing Russian brokers. Some of the top brokers have all had their licenses revoked and this includes Instaforex and even Alpari. This doesn’t however mean that clients can’t trade with them anymore.
This is an interesting point to say the least. A professional from the industry, who has chosen to remain anonymous has stated that even though there has been a lot of negative press with the bank suspending the brokers, it actually had an impact on the trading activity overall. Sure, they took their licenses away and they also brought about a bit of negative publicity too. They have also taken away their right to legally market in the Russian federation too. If you want to understand this situation then you need to look at the overall volume that it was before this happened. When you do this, you will soon see that a lot of the volume is actually coming from off-shore.
So the central bank have been against the FX sector for quite some time. In 2012, they decided to change their attitude towards the industry and they also took a much more negative approach. Brokers then started to set up shop in the country and this made things even worse. Why did this happen? According to the anonymous source, the main reason is because the bank of Russia are not huge fans of the sector because it doesn’t give them a high level of control. They are mainly against it because they are not able to tax it, and this is something that every single government in the world wants to do. The other reason for this is because at the moment, there are a ton of scams which are happening in Russia right now.
So although the FX market is completely non-existent in Russia right now, the trading demand is still super high and clients are now opting to go with offshore brokers instead. This is unpoliced and really, as long as they continue to do this, it goes way under the radar. The central authority are now trying to take way more moves to choke this out and that brings around the question, are things nearing the end? Let’s go back to the source. They don’t think that there is going to be any immediate way for the bank of Russia to choke out the industry, but they could easily make things very difficult for brokers.
There is some degree of merit to concerns such as this. The main reason for that is because they could easily start to employ way more predatory tactics to try and restrict any foreign licenses that they have. This is more than possible. One method that has been seen is that the government used IP blocking of websites so that it is nearly impossible for Russian people to access the site if they are using a Russian internet provider.
This is bad to say the least. Another method that has been used is regulatory arbitrage. There are cases where this has happened. One of them concerned the CySEC. So let’s look at the following, for example. Maybe the EToro that once gave Forex to Russian clients, but then closed down. Instead, they then began to offer cryptocurrency. This for example, viewed the industry as a way of restricting companies.
So it is not easy for you to set up as a broker in Russia, and this is especially the case if you are a foreign broker. If you are a new broker, then it is nearly impossible for you to break into this market. The Forex license is not appealing at all and it only stops a low leverage which is at 1:50. This is still better than Europe, but clients do need to come into the office where the broker is so that they can sign up. They aren’t KYC at all, and they can’t do it over the internet either. This makes it different to the entire rest of the world. So when you look at the large amount of people that live in Russia, you will soon see that it is very difficult to legally onboard them. They will need to have a lot of different branches throughout the country and on top of this, people need to be able to travel to them as well. That brings about the point. Just because it is difficult for people to set up their own brokerage in Russia, does not mean that it is difficult for an offshore broker to take on any clients from Russia.
So how do the Russians trade Forex? Beginner traders are sticking to the Moscow Exchange, but the more experience traders are now going offshore. It might not come as a surprise that Russian FX traders tend to be big risk takers. They need to go big or go home, and this really does reflect the overall trading behavior.