Forex market participants: “food chain. How the Forex market is regulated in Russia and in the world The main participants in the forex market are

Since the beginning of 2016 B RF regulation law came into effect Forex, adopted at the end of 2014. Then the Central Bank of the Russian Federation presented a number of important projects related to the activities of dealers, storage and disclosure by them of information about the compensation fund, standards and requirements of a self-regulatory organization, etc.

What does the introduction of this law really mean for clients:

• obtaining a license from the Bank of Russia;
• entry of brokers into a self-regulatory organization (SRO);
• separation of client funds from company funds (and their placement in a Russian bank, and not in an unknown offshore);
• carrying out activities strictly according to certain standards.

Who regulates the Forex market in Russia

And nobody interested him until 2012. The lack of legal regulation turned this area of \u200b\u200bthe investment business into an endless field for the activities of various types of fraudsters and dishonest brokers who, instead of being able to work in the largest financial market, offered their clients a “kitchen”.

In 2012, the Russian government became interested in who regulates Forex in Russia - the volume of monthly turnover of funds in this market has reached $ 330 billion per month, and such impressive financial flows cannot be endlessly ignored by the Central Bank of the Russian Federation, the Ministry of Finance and other state structures.

Since January 1, 2016, the Central Bank has been assigned the official status of the regulator of the Forex investment market. Forex Law, which is Article 4.1 of Law No. 39-FZ,
provides the Central Bank with all the necessary powers to regulate the commercial activities of brokers and investors. The purpose of the adoption of this law is to bring investment activity in the Forex market to a legal basis, to establish transparent conditions for cooperation between brokers and traders, as well as to eliminate unscrupulous companies from this business. Controlling investment activities in the Forex market TSB RF helps to implement controlled SROs ( Self-regulatory organizations).

Forex dealer in the world of stock trading

From January 1, 2016, brokers who are referred to in the legislation as forex dealersare required to obtain a license allowing them to legally act as an intermediary between the trader and the market.

This license is issued by the Central Bank of Russia after a positive decision has been made on an application submitted by representatives of a company claiming the status of a forex dealer. According to the aforementioned law, a forex dealer must have an authorized capital in the amount of 100,000,000 rubles or more, as well as the means and opportunities to increase it in the event of an increase in client deposits. The term for consideration of an application for a license is 60 working days.

Also broker must join an SRO, make a payment to the compensation fund of this organization in the amount of 1,000,000 rubles and make monthly membership fees.

Self-regulatory organizations of forex dealers impose certain requirements on their members, namely: the presence of certificates confirming the high qualifications of the company's staff, and an agreement for concluding an agreement with clients, which is approved by experts of the SRO and TSB RF... To employees of forex dealersself-regulatory organizations have the following requirements: the presence of a certificate of the Federal Financial Markets Service 1.0, higher special education and experience in the financial markets from 2 years. The client agreement of a forex dealer must contain the terms of relations with traders, opening positions and setting quotes.

Main regulator the banking system of the Russian Federation is an accreditation center for SRO forex dealers. To obtain accreditation as part of a self-regulatory organization should include at least 26% of brokers' participants working in the foreign exchange market. Otherwise, the SRO will not be able to obtain accreditation. You can get acquainted with the register of forex dealers and accredited SROs on the website of the Central Bank of Russia.

Membership in self-regulatory organizations and license only large companies can do it. Small brokers will be forced to leave the market or go into the shadows. As conceived by the authors of the Forex law, thanks to the January amendment to Federal Law No. 39, there will be no room in this area for fraudsters and “gray” companies that offer customers “kitchen” instead of real activity in the foreign exchange market.

How does the law restrict the activities of brokers?

No bank has the right to operate in the foreign exchange market as a forex dealer.

However, banks are allowed to own companies that provide brokerage services to individuals working on Forex as traders. Foreign companies registered in the controlling organizations of their countries, but not having the official status of a Forex dealer, are not professional participants in the Forex market in Russia, but the law does not prohibit traders from working with legal entities from other countries. Such companies also cannot advertise themselves - experts from the FAS and the Central Bank will monitor compliance with this prohibition.

Forex dealers are prohibited from entering transactions on the interbank level, provided that they are subsequently executed within the company at internal quotes. Also, a forex dealer is obliged to work as bank, that is, keep a documentary record of all concluded transactions. Record keeping of transactions should be handled by an employee appointed to this position. Information on executed transactions is provided to the Central Bank.

No broker can keep traders' funds on controlled accounts - now this is prohibited by law. This restriction is intended to protect investors' funds in the event of a broker's bankruptcy. Customer deposits are held in nominee accounts.

Upon obtaining the status of a forex dealer, the company automatically becomes a tax agent. The status of a tax agent obliges the broker to withdraw traders 'funds only to accounts in Russian banks and to pay income tax on clients' profits.

Forex dealers are deprived of the opportunity to trade futures, indices, oil and many other assets, with the exception of 26 currency pairs. This limitation creates a number of inconveniences for both brokers and traders. However, these assets are possible subject to cooperation with a foreign legal entity.

Advantages and Disadvantages of the Forex Law for Traders

The law regulating the work of the Forex market in the Russian Federation limits the liability of a trader to a broker. A forex dealer cannot collect funds from his client in excess of his investments. That is, even in the most unfavorable situation, the trader loses only the invested money.

If there are claims to the broker, the client has the right to apply for help to an accredited self-regulatory organization, for example, the "Association of Forex Dealers". Usually SROs carrying out market regulation Forex accredited by the Central Bank, make a decision in favor of a trader who, in his opinion, an unfair resolution of the conflict, can file a complaint with a higher supervisory authority - Central bank.

Upon receipt of a complaint, the experts of the regulator conduct a check, which may lead to the revocation of the license from the SRO and the forex dealer, which is one of the parties to the conflict. By the way, it is for this reason that most disputes between SROs controlling currency market Forex, decide in favor of traders, and brokers do everything possible to settle a dispute with a client without involving higher organizations.

• Last forex law provides maximum protection for the trader from the consequences of the broker's bankruptcy. Deposits of forex dealers are on the accounts of nominee holders - a bankrupt company cannot use this money for its own purposes. The bankruptcy debts are repaid at the expense of funds from the compensation fund of the SRO, in which the bankrupt forex dealer is listed.

A broker can be declared bankrupt only after an appropriate procedure is carried out, the order of which is regulated by the legislation of the Russian Federation. There is no other way for a company to leave the foreign exchange market. If the court makes a positive decision on declaring the company bankrupt, its clients receive the invested funds in turn.

In the absence of a sufficient amount of money in the compensation fund to pay off the debts of the bankrupt, the rest of the SRO members are obliged to pay off the debts of the bankrupt company at their own expense. At the same time, the share that members of a self-regulatory organization are obliged to pay to former clients of a bankrupt depends on the volume of turnover of their financial assets. The obligations of the bankrupt forex dealer to the traders who worked with him are fulfilled in full at the expense of the compensation fund or funds of SRO members.

Foreign brokers have the right to operate in Russia without a license from the Central Bank.

Their clients get the opportunity to trade any asset: oil, precious metals, futures, indices, stocks. These companies include large brokers that are controlled by foreign organizations that regulate the Forex market. Foreign companies are regulated by ASIC, FCA, NFA and other official organizations. In the event of disputes with a broker, traders from Russia have the right to contact a foreign controlling organization for assistance in resolving a difficult situation.

The largest foreign brokers working with clients from Russia are the following companies, and.

Who regulates Forex in Russia?

From January 1, 2016 on the question of whether who regulates Forex in Russia, a clear answer can be given - by the Central Bank and the SROs accredited by it, and the latter participate in this process more intensively, while the regulator of the banking system of the Russian Federation remains the role of the highest authority.

The Central Bank's status as a regulator of the Forex market is enshrined at the legislative level. The law regulating "Forex" makes the relationship between brokers and traders absolutely transparent, and also guarantees the protection of rights and investments for clients of forex dealers.

Russian companies reacted positively to the new law on the Forex market, as did their foreign counterparts, including the largest Forex broker in Russia. Naturally, Alpari fully supports such actions, since they are aimed at increasing the transparency of transactions, increasing the safety and trust of customers, as well as hindering the activities of unscrupulous brokers (or simply “kitchens”).

According to the latest data, Alpari's monthly turnover ranges from $ 80-110 billion.

Of course, such funds are difficult and unnatural to hide.

At the same time, experts note that the new article of Law No. 39-FZ has a number of shortcomings. The update of this law made the conditions for entering the foreign exchange market more difficult.

Forex regulation in the West

At the moment, there is no single body or service for control over OTC trade for all Western countries; it is carried out by different institutions in different jurisdictions.

USA

One of the pioneers of Forex regulation is the USA, in this country dealers must be licensed FCM (for brokers) or RFED (for dealers), which, in turn, are accountable to the Commodity Futures Trading Commission ( CFTC), from which they receive their licenses, as well as the National Futures Association ( NFA).

The main advantage of such regulation for ordinary traders is the exclusion of firms with a small amount of their own funds or poorly developed user agreement regarding financial risks from the brokerage market. Needless to say, how much this reduces the risk of problems due toactions of the broker, since, in addition to those already listed, the regulators from the regulators strictly monitor that brokers exactly follow the clients' orders, do not overestimate spreads and commissions. These advantages of regulation apply not only to the United States, but to the same extent to other countries.

Great Britain

Previously, UK brokers and investment firms were supervised by FSA and the Bank of England, however in 2013 a new, independent ( but in all respects the FSA and Bank of England regulations) structure - ( Financial Conduct Authority). The field of activity of the organization includes:

• development of standards in the field of financial services and reporting;
• popularization of investment activities, trading;
• supervision over the actions of market participants in order to ensure maximum transparency and fairness of transactions;
• analysis and investigation of disputes between market participants;
• prohibition of services and companies that do not meet the accepted standards of the UK financial market.

Independence from the state and, at the same time, strict adherence to high standards, provide FCA with high authority and level of trust ( primarily from the side of traders).

European Union

In the EU, Forex is regulated by a financial directive initiated by the FSA. MiFID operates in 27 of the 28 countries of the European Union.

As for the goals, objectives and methods, they are largely similar to those already described earlier, you can add only, perhaps, the need for a mandatory 5-year storage of reports and information on financial transactions, as well as some EU-specific aspects related to interstate relations and the rules for opening branches within the union.

The level of trust among traders and investors in MiFID high, another thing is that in some countries ( usually offshore) their own local, less strict rules also apply, for example - Cyprus, Malta, Gibraltar.

As a conclusion

In no case should we consider the control of the Forex market as something bad, rather the opposite, since not only the work of regulators, but the very fact of their presence contributes significantly to improving the quality and transparency of financial services.

Only kitchens and organizers of money laundering, honest brokers and traders should not be really afraid of over-the-counter foreign exchange market supervision; on the contrary, the presence of serious regulatory bodies helps to strengthen mutual trust between participants, preserve and attract capital.

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These are commercial banks. It is they who carry out the bulk of foreign exchange transactions at their own expense and on behalf of clients. Other participants in the foreign exchange market keep their accounts in commercial banks and send them applications for the purchase and sale of one currency for another for their own needs (conversion operations) and also credit and vice versa keep their deposits in banks (deposit and credit operations). Banks, being specialized organizations, accumulate (through operations with clients) market needs (supply and demand) and if they are not able to satisfy these needs, they themselves satisfy them through other banks. Therefore, forex is not, in fact, an exchange; in the strict sense, it is a market for interbank transactions (sometimes they say interbank for short). Commercial banks also carry out speculative operations using their own funds.

Firms engaged in foreign trade operations
Firms carrying out import operations present a demand for foreign currency (for the purchase of goods) and a corresponding supply of national currency. Companies engaged in export operations create a supply of foreign currency (the proceeds from the sale of goods) and a corresponding demand for the national currency necessary for wages, other costs and taxes. In addition, both of them place free currency balances on their accounts in deposits or securities, or attract loans in different currencies, depending on interest rates and their own expectations. As a rule, all these transactions are done through commercial banks.

Funds and companies making foreign investments
International investment funds, as well as large commercial corporations operating overseas, manage their own portfolios of securities (for example, government bonds and bonds of private companies) denominated in different currencies or hold large deposits in commercial banks in order to profit from such investments.

Central banks
The functions of central banks include maintaining the smoothness of fluctuations in the national currency exchange rate, managing foreign exchange reserves, regulating refinancing rates and maintaining the liquidity of the national market. The greatest influence on the forex market is exerted by: the US Federal Reserve (FED), as well as its Federal Open Market Committee (FOMC), European Central Bank (ECB), Bank of England (Bank of England - BOE, also called Old Lady), Bank of Japan (Bank of Japan or BOJ)

Currency exchanges
Currencies are also traded on domestic national exchanges. In addition, a significant part of standardized derivatives for currencies are traded on exchanges: futures, options, etc.

Brokerage companies
Brokerage companies are engaged in bringing together the buyer and seller of currency in the event that there are no stable counterparty agreements between them. Brokerage firms charge a brokerage fee for their intermediation, usually as a percentage of the transaction amount.

Dealing centers, dealing companies.
Dealing centers play the role of a kind of intermediaries, working with small amounts of individuals and accumulating them for commercial banks.

Private persons
Individuals carry out a wide range of conversion and arbitrage operations, demand currency for tourism purposes, purchase goods abroad, convert wages, etc., and also carry out speculative operations.

First of all, it must be said that there are various types of participants in the foreign exchange market. Central banks, commercial banks, investment funds, financial firms, brokerage houses and individual traders. Each participant is interested in buying at a lower price and selling at a higher price, but each participant has his own main function that he performs in the market.

Commercial banks
For commercial banks, the main function of participating in foreign exchange trading is to ensure liquidity of their own funds and fulfill client orders, for example, orders of importers and exporters. Enterprises located in one economic zone and interested in goods or raw materials produced in another economic zone will be forced to exchange their national currency for the currency of the country in which these goods are produced. The exchange of money (conversion operation) is carried out for them by commercial banks. The volume of conversion transactions is very significant and can be up to 2/3 of all daily transactions on FOREX. This fact, of course, also leads to changes in exchange rates, since supply and demand for different currencies are in constant flux.

Ultimately, the foreign exchange market is a market for interbank transactions, and, subsequently speaking about the movement of exchange rates and interest rates, one should bear in mind the interbank foreign exchange market.

Large international banks have the greatest influence on the world currency markets, with daily volume of operations reaching billions of dollars. These are banks such as Deutsche Bank, Barclays Bank, Union Bank of Switzerland, Citibank, Chase Manhattan Bank, Standard Chartered Bank and others. Their main difference is the large volumes of transactions, which can lead to a significant change in the quote or in the price of the currency. Usually the big players are categorized as bulls and bears. Bulls are market participants who are interested in increasing the value of a currency; bears are market participants who are interested in lowering the value of a currency. Usually the market is in a state of equilibrium between bulls and bears, and the difference in currency quotes fluctuates within fairly narrow limits. However, when the bulls or bears "take over", the quotes of exchange rates change quite sharply and significantly.

Firms engaged in foreign trade operations
Companies involved in international trade present a steady demand for foreign currency (in terms of importers) and supply of foreign currency (exporters), and also place and attract free foreign exchange balances in short-term deposits. At the same time, these organizations, as a rule, do not have direct access to the foreign exchange market and carry out conversion and deposit operations through commercial banks.

Companies making foreign investments in assets (Investment Funds, Money Market Funds, International Corporations)
These companies, represented by various kinds of international investment funds, pursue a policy of diversified portfolio management by placing funds in the securities of governments and corporations of various countries. In dealer slang, I simply call them funds or funds; the most famous are the "Quantum" fund of George Soros, which conducts successful currency speculation, and the "Dean Witter" fund.

This type of firm also includes large international corporations that carry out foreign industrial investments: the creation of offices, joint ventures, etc., such as, for example, Xerox, Nestlé, General Motors, British Petroleum and others.

Central banks
Their main task is foreign exchange regulation in the external market - namely, prevention of sharp jumps in the rates of national currencies, in order to prevent economic crises, maintain the balance of exports and imports, etc. Central banks have a direct impact on the foreign exchange market. Their influence can be both direct - in the form of foreign exchange intervention, and indirect - through the regulation of the volume of money supply and interest rates. They cannot be classified as bulls or bears, because they can play both up and down based on the specific tasks facing them at the moment. The Central Bank can act on the market alone, to influence the national currency, or in coordination with other Central Banks to conduct a joint monetary policy in the international market or for joint interventions.

The greatest influence on world currency markets is possessed by: the central bank of the USA - the Federal Reserve System (US Federal Reserve or FED for short), the central bank of Germany - the Bundesbank (Deutsche Bundesbank) and Great Britain - the Bank of England (Bank of England, also called Old Lady).

Currency exchanges
In a number of countries with economies in transition, currency exchanges operate, whose functions include the exchange of currencies for legal entities and the formation of market exchange rates. The state usually actively regulates the level of the exchange rate, taking advantage of the compactness of the exchange market.

Foreign exchange brokerage firms
Their function is to bring the buyer and seller of foreign currency together and carry out a conversion or loan-and-deposit operation between them. For their mediation, brokerage firms charge a brokerage commission as a percentage of the transaction amount.

Private persons
Individuals carry out a wide range of non-trade operations in terms of foreign tourism, transfers of wages, pensions, fees, buying and selling foreign currency. And in 1986, with the introduction of margin trading, individuals were able to invest free funds in the FOREX market in order to make a profit.

The main volumes (90-95%) in the FOREX market are made by the world's largest commercial banks, performing conversion operations both in the interests of their clients and at their own expense. Nevertheless, progress in the field of computer technology allowed in this area of \u200b\u200bfinance to find an area of \u200b\u200bapplication for funds of private and often small investors. An increasing number of brokerage firms and banks open access to the FOREX market for private investors via the Internet.

By tracking short-term fluctuations in currency pairs, it is as easy to overlook general market trends as it is to overlook the broader trading ecosystem by focusing on minor fluctuations in open positions.

Forex market Is a full-fledged world with a wide range of participants from private traders like you to interbank networks, etc. Acting as individual retail trader, you are at the bottom of the food chain, you are a small fish. Although you have the ability to buy and sell the same currency pairs as other participants, you nevertheless need to overcome longer chains of transactions compared to others in order to get liquidity, since you do not get the same prices as the ones above. other market participants in the hierarchy.

You cannot influence the market with your trades, as you are too small to "create a wave". Your role here is to react correctly to what is happening in general in the market and with you in particular. While this may seem like a disadvantage, it also has advantages. When you begin to understand exactly what events influence trends, how they happen and why, you will reach an important level as a trader. By understanding the broad structure of the market, you can make the right choices and reduce the likelihood of accidents while trading.

Participation of the Government and Central Banks

Central banks, such as the Federal Reserve, manage the money supply and interest rates and oversee commercial banking systems. These are the blue whales of the foreign exchange market. As part of their responsibility for managing growth and exchange rate stability, central banks provide huge impact on the Forex market.


In open market operations, central banks control money circulation and stabilize interest rates through repurchase agreements (repos) with commercial banks (primary dealers). Buyback agreements work effectively to increase the money supply in the economy when central banks lend funds (through purchases of Treasury bills from the banking sector) or, in the case of reverse repos, to withdraw funds from circulation during the narrowing of funds (by selling Treasury bills to the banking sector). ).

When costs outstrip production (demand is higher than supply), prices rise, and this is called. Faced with inflation, banks also have the option of directly raising interest rates, which makes lending more expensive and also increases the cost of servicing current loans, and the outlook for the lending sector is darker. When production outpaces costs (supply is higher than demand), prices fall, and this is called deflation... Faced with deflation, central banks can lower interest rates, cut the cost of lending, which will lower the cost of servicing current loans and brighten the prospects for lending.

What is really worth realizing is that the free market exists within a very fragile ecosystem that balances through periodic intervention from central banks. There are several reasons why central banks are at the top of the Forex food chain. Only they in the financial system can create and withdraw funds, set interest rates, influence market expectations and hold impressive foreign exchange reserves (the most popular are the US dollar and the euro). The impact that central banks can have on the Forex market as part of adjusting their own foreign exchange reserves can be quite impressive due to the volume of transactions.

The participation of institutional dealers in the Forex market

These are banks and financial institutions; institutional dealers provide liquidity to the foreign exchange market. Dealers trade with each other in the interbank market, secured by lending between participating institutions. Generally speaking, the interbank market is a chain of institutional Forex dealers who trade currencies with each other to maintain liquidity in the banking system. According to data collected by the Bank for International Settlements in 2013, the interbank network forms about 40% of the Forex market turnover per day, that is, $ 5.3 trillion.


Banks and large financial institutions trade with each other to ensure they have enough liquidity to meet the needs of their clients. Their clients include smaller banks without the credit relationships required to participate in the network, companies that require foreign exchange as part of their import and export cycles, forex brokers acting as intermediaries between large banks and retail traders, private clients who access to funds and credit services is required. These institutions can borrow directly from central banks at wholesale prices, which will enable them to access liquidity at better prices than other market participants down the chain. Their profits are generated from liquidity premiums paid by smaller institutions, companies, brokers and private clients.

Prime Dealers set exchange rates for the pairs traded. Forex is a completely decentralized marketwhere there is no single price for any currency pair, and each institution has quotations that are somewhat different from others, depending on the dynamics of supply and demand. When we announce prices to our clients, we find the best bid / ask difference from our liquidity providers and execute your orders at a weighted average price after charging a cTrader commission or adding a small mark-up to the spread (MT4).

As part of their monetary policy stance, central banks set overnight interest rates (known as the basic refinancing rate in Europe and the federal funds rate in the US). Institutional dealers use these rates to lend and lend to each other. In practice, the complex needs of the global economy mean that these rates are constantly changing. Due to the different conditions of supply and demand, the actual rates for such transactions are constantly changing. This rate is known as Libor.