The Russian Forex market is undoubtedly a very vibrant one, full of potential and opportunities to be had. What follows is an overview of this market, prepared by the OnlineForexTrading team, aiming to provide you with an invaluable tool, containing all the relevant and up-to-date information pertaining to the Russian Forex market, enabling you to acquire a thorough understanding of this market and increasing your chances of successfully investing in it. The OnlineForexTrading Russia Forex Country Report is a definite “must-read” for everyone, Russian or foreigner, wishing to trade forex in Russia.
Since its initial stages back in the 1990s with only a handful on traders on the scene, the retail forex sector in Russia has expanded tremendously and now embraces literally hundreds of thousands of traders. Although a lot of Russia-based forex retailers have gone on to successfully expand their operations on the global market, the domestic Russian market is still believed to hold a large potential for further development, growing at a fast pace and presenting promising future prospects. Although the retail forex sector in Russia has flourished over the last ten years, still the percentage of people choosing to invest in such financial products is relatively low. It is certain that this percentage will rise, fuelled by the overall economic growth in the country, coupled with improvements in the regulatory framework which will inspire people’s confidence further, while the prospective investors themselves are expected to gain a better understanding on forex trading and thus be more prepared to put their money into it.
As the Russian economy has developed over the recent years, increasing simultaneously its participation in the global economy, so has the foreign exchange market in the country grown on par. In fact the decision of the Russian government to introduce the convertibility of the ruble was based on the effort to help the country’s economy transit into a true market economy. Russia's foreign exchange rate has since then changed from multiple exchange rates, to managed floating rates to soft peg.
The US dollar features as an important means of exchange in Russia, although this does not mean that the Russian ruble has been sidelined. In fact, the ruble gained importance and emerged as a truly important hard currency as a result of the extensive changes in the Russian foreign exchange market , including the price liberalizations which came into effect in 1992. Holding hard currency reserves is allowed in Russia and it has therefore become commonplace for Russian citizens to convert their rubles into dollars and vice versa, thus benefiting from exchange rate fluctuations.
Things were much different back in the Soviet Union era, when the allocation of foreign exchange was only possible through state auctions. In 1989, the Soviet authorities decided to introduce flexibility in exchange rates. Following this decision, the first currency exchange in the country was set up in 1991 by the Central Bank of Russia and in 1992 it was named the Moscow Interbank Currency Exchange (MICEX). This is the body through which foreign currency trading is carried out in Russia until today. However, the Russian foreign exchange market is in effect regulated, moderated and controlled by the Central Bank of Russia, which in practice can control the internal foreign exchange turnover being generated, through its power to issue special foreign exchange licenses to the local commercial banking institutions.
Due to the control of the Russian Central Bank, the Russian foreign exchange markets can be described as largely centralised. The commercial banks that manage to obtain the special license/permission of the Central Bank gain the right to trade in foreign currency in the local market as well as externally, being able to buy foreign currency from exporters and sell the various currencies to importers.
Besides the US dollar the other major currencies with large trading volumes in the Russian foreign exchange marker are the Euro and the Japanese yen.
The retail forex market through its expansion has left its mark and has had a significant contribution to the overall growth of the Russian economy as a whole. From its modest beginnings as a spot market solely it has since expanded into futures and forward markets as well.
Forex Regulation in Russia
The regulation of retail forex, as well as all the other financial products being offered to investors, is of paramount importance since it creates the necessary safe environment for investors to trade within, providing them with guarantees that those offering such products will be able to return the funds to their customers and will not suddenly shut down “shop” and run away with people’s money.
Recognising the importance of a regulatory framework and taking into account the increasing numbers of Russian traders, the local financial activities regulator in Russia, the Federal Financial Markets Service (FFMS) has decided to draft specific regulations for Russian firms offering forex investments. Although the relevant decision was taken back in 2008, actual regulation of the forex market has not occurred yet, but decisive steps towards this direction have already been taken.
The motives and reasons why a first time, inexperienced forex trader from Russia would prefer to place his trades through a Russian based broker are simple and easy to understand. Besides the language barrier that is avoided it also offers a trader more security that he is dealing with real people, who work in a real brick and mortar office a few kilometres away, rather than trusting their money to an impersonal virtual account or to a broker located on the other side of the planet. Trading though a local broker makes an investor feel more comfortable, reassured and more in control of the situation and his funds. However, the absence of state regulation of the forex field in Russia increases the potential risk for investors.
As forex trading in Russian increases in popularity the largest Russia –based forex companies offer ample education and information to interested potential investors, through courses and other educational materials in the Russian language, at no cost. The customer support and supplementary materials in owns mother tongue are important factors, however they are not enough and choosing the right forex company to trade through in Russia will entail some research to establish if the company has a good track record and a good reputation both in the media and among the trader community and whether it is an established firm with a consolidated history behind it. Therefore, before choosing your Russian retail forex broker, check out the suggestions we provide below.
Since official state regulation of the retail forex field has yet to be achieved in Russia, potential investors who value regulation as a factor to take their decision on which broker to trust should look for alternative endorsements ,from non-governmental bodies. One such entity is the Russian Association of Financial Market Members (RAFMM), which according to its website is” a non-commercial organization, which voluntarily unites under its authority reliable and purposeful financial market participants.”
Besides Liteforex and Instaforex, which are regulated by RAFMM, soon we will publish a list of other forex brokers in Russia which we consider to be reliable and trustworthy to open an account with.
George Milios is the founder of onlineforextrading.net, the binary options and forex news portal which is dedicated to providing you with all the information you need to successfully trade.