Last week’s news that the Russian central bank is barring five companies from the foreign exchange market was a shock for the sector but is hardly an unexpected turn of events, Finance Magnates writes. The flight to jurisdictions where the central bank has no oversight was cited as the primary reason for the revoking of several licenses last week.
The authoritarian Russian state has been on the heels of many businesses over the years and cartels in virtually every sector of the economy are commonplace. In this situation, up until recently, the forex brokerage industry has been the exception, rather than the rule, the news outlet wrote.
The central bank cracked down hard on the regulated industry and delivered on the threats made by the First Deputy Chairman of the Bank of Russia, Sergey Shvetsov. Back in October this year, he suggested that leveraged trading could be banned altogether. To the detriment of traders and the local pioneers in the forex industry, this only happened for a predetermined number of companies.
Ever since the introduction of the Russian regulatory framework the government’s approach to the market has been clear – creating a framework that only the central bank can control. As a result, the industry’s self-regulatory body CRFIN was made obsolete. The central bank encouraged the creation of the NAFD (National Association of Forex Dealers).
The newly created industry body welcomed select companies to its ranks and started the process of differentiation between different market participants. In the meantime, local brokerage companies have been shifting their attention offshore, something that didn’t escape the regulator’s oversight, Finance Magnates writes.