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Russia plans to limit the leverage on the Forex market (and not only)

Russia plans to limit the leverage on the Forex market (and not only)

created Paweł MosionekSEPTEMBER 8, 2018

Russia is planning to follow European ESMA regulations. According to information provided by Reuters, the Bank of Russia is considering limiting the maximum financial leverage on the Forex / CFD market to the already well-known level - 1:30. Complaints from clients who have lost their funds are to be responsible for this state of affairs.

Will limiting leverage help?

As Olga Shishlyannikova, deputy director of the securities and commodity markets department at the Bank of Russia, said, the institution there is receiving more and more complaints from Russian clients investing in the Forex market. Therefore, an idea emerged that has already been applied in practice by ESMA in the European Union - limit the leverage to 1:30. Will this prove to be an effective solution? There are some doubts about that.

At the beginning it is worth noting that at present the maximum leverage in Russia is 1: 50, so the reduction would not be too big. However, the problem may be that only 1,75% of Russian retail customers use the services of native brokers. The remaining part, ie over 98%, is traded with the use of foreign brokers, which is often encouraged by the Russian brokers themselves who have additional, foreign branches of the company.

So you might think that the proposed changes will do nothing. But the Bank of Russia plans to solve this problem as well by prohibiting the use of brokers outside Russia. However, it is not clear on what principles such a "blockade" would function.

Compulsory training for future traders

The Russian regulator plans to go a step further and not stop it. Another idea is the introduction of mandatory training for retail clients. For now, it is not known how it would look like in practice and what consequences would be associated with possibly non-inclusion or non-completion of training. But from the proposed list of changes, this seems to be the most sensible solution to the current problem for the benefit of all.

The issue of cryptocurrencies, which in the last 2 years experienced a real boom of interest, was also discussed. In Russia, trade in them was completely forbidden, but this will change as soon as a special unit regulating this sector is created.

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About the Author
Paweł Mosionek
An active trader on the Forex market since 2006. Editor of the Forex Nawigator portal and editor-in-chief and co-creator of the website. Speaker at the "Focus on Forex" conference at the Warsaw School of Economics, "NetVision" at the Gdańsk University of Technology and "Financial Intelligence" at the University of Gdańsk. Twice winner of "Junior Trader" - investment game for students organized by DM XTB. Addicted to travel, motorbikes and parachuting.