Between 54-87% of retail CFD accounts lose money. Based on 69 brokers who display this data.
Between 54-87% of retail CFD accounts lose money. Based on 69 brokers who display this data.
Russia’s financial sector has recovered considerably since the collapse of the Soviet Union in 1991, marking the end of 69 years of a centralized government and economy. Today, despite several recent disruptions such as the US and Europe imposing trade sanctions on Russia in 2014, 2017 and 2018 for its aggression towards the Ukraine and in support of Syria, the country’s financial sector remains vibrant and viable.
The leading stock exchange in Russia is known as the Moscow Exchange (MOEX), or Московская биржа in Russian, and was founded in 2011. This was born from a previous stock market known as the Russian Trading System (RTS), which had been established in 1995 by consolidating several other regional exchanges into one centralized one based in Moscow.
The RTS initially used the NASDAQ settlement and trading software, but the exchange began using its own software in 1998. In 2011, the RTS merged with the Moscow Interbank Currency Exchange (MICEX), which had opened in 1992 and was then also a leading Russian stock exchange. That merger formed the MOEX, which went public in 2013.
The MOEX provides a market in stocks and a wide range of derivatives, in addition to fixed income products, funds, currencies, money market instruments and precious metals. The MOEX presently ranks 22nd among the world’s largest stock exchanges by market capitalisation, according to data provided by the World Federation of Exchanges.
The MOEX has two main stock indices. The first is the RTS Index, a freely floating capitalisation weighted index made up of 50 Russian equities and computed in U.S. dollars. The second is the MOEX Russia Index, formerly known as the MICEX Index, which consists of the same stocks as the RTS Index but denominated in Russian roubles instead of dollars.
Forex traders are very likely familiar with the Russian ruble or rouble (RUB), which is the Russian Federation’s national currency and is further broken down into 100 lesser units called kopeks or kopecks. The RUB is issued and managed by the Central Bank of the Russian Federation, which is also known as the Bank of Russia (CBR). The CBR acts as the country’s central bank and is based in Moscow.
Based on information provided by the Bank for International Settlements (BIS) for 2016, the ruble ranks as the 17th most common globally traded currency, and it accounted for 1.1% of the total forex market turnover seen that year. The ruble did not rank among the eight most popular currencies held by central banks as reserves in 2018, according to information compiled by the International Monetary Fund (IMF).
The CBR acts as the primary Russian financial sector regulator and enforces laws regarding Russian financial markets and their participants. Its role in the financial industry is to help protect the rights of traders and investors by promoting confidence in Russian financial institutions and in Russian markets by making them accessible and helping them operate smoothly. The CBR took over its financial regulatory role from the Federal Financial Markets Service (FFMS), which was an official federal executive agency disbanded in 2013.
To help prevent fraud, all forex dealers and online brokers soliciting clients from Russian offices must be licensed by the CBR. Forex dealers must also become and remain a member in good standing of the Association of Forex Dealers (AFD), that is also sometimes called the National Association of Forex Dealers (NAFD). The AFD is an official self-regulatory organization operating under the CBR’s approval that oversees online forex brokers and was known as CRFIN prior to 2016.
Furthermore, unofficial organizations like the Centre for Regulation of Relations in Financial Markets (CROFR) and the Financial Arena Relations Regulation Centre (FMRRC) are independent, non-government self-regulatory groups.
These groups informally oversee Russian financial brokers that deal in securities, forex, contracts for difference (CFDs) and other derivatives and set basic rules of practice that brokers need to follow to retain their certificates of conformity that the organizations issue. These organizations lack teeth, however, since they cannot initiate legal actions for misconduct, other than revoking a firm’s certificate.
A handful of CRB licensed online forex brokers have their offices situated in the Russia and can service Russian clients. Traders living in Russia can also deposit money in a margin account with a foreign broker so that they can trade online, although any foreign broker needs to be strictly regulated in their local jurisdiction to help ensure the safety of funds deposited as margin.
Using a licensed broker based in Russia to trade through will usually be preferable to a foreign broker because they need to maintain their local reputation to satisfy the CBR. This also allows disputes to be litigated locally, if necessary.
In 2017, the CBR announced that it intends to implement information disclosure requirements for offshore forex dealers that provide trading services in Russia, so this might reduce the ability of foreign brokers to cater to Russian clients. Furthermore, in December of 2018, the CBR revoked the licenses of five out of the nine Russian based forex dealers, including those of some major brokers, citing the use of those licenses in advertising that led to client trading losses.
Online brokers will generally offer practice or demo accounts that can be used to trade with virtual money. These accounts are helpful because they allow traders to test strategies and practice trading using a broker’s trading platform software.
Funded accounts generally require traders to make a minimum initial deposit with a broker to start trading. Muslim traders who prefer a Sharia law compliant account can often get Islamic accounts without swaps on rollovers.
If having a broker’s website and customer support services available in Russian is a requirement, make sure to ask about that before funding a live account with them. Almost all brokers will offer English text and communications too.
The types of asset classes available for online trading differ considerably among brokers, although virtually all online brokers offer forex trading of some kind. If a wider selection of asset classes seems preferable, then trading in contracts for difference (CFDs) may be more suitable.
With respect to the trading of equities, the MOEX maintains fair and transparent markets in a wide range of asset classes, as well as Russian stocks. MOEX trades are generally executed in Russian rubles. Russia’s MOEX stock exchange feeds into the Euroclear and Clearstream systems used for international payments and settlements. This interface allows investors to directly access Russian exchange traded securities at dealing desks worldwide.
Russia’s has a vast territory of 16.4 million square kilometres and a population of 143.9 million people, of which 72.7% live in an urban setting. Russia’s economy ranks 11th in size by nominal GDP and 6th largest by purchasing power parity (PPP) according to the International Monetary Fund (IMF), and it remains a large potential market for businesses and world investors.
Also, Russia’s per capita GDP was $27,890, the highest among the BRICS countries (Brazil, Russia, India, China and South Africa), which makes Russia a high income nation with an educated workforce and sophisticated consumers.
According to the World Bank, the Russian Federation ranked 31st for the general ease of doing business in the country. Russia also ranked favourably with respect to registering property and getting electricity, ranking 12th in both categories among the nations surveyed.
According to the World Bank Group, the Netherlands, China, Belarus, Germany and Italy remain Russia’s top and closest trading partners. Due to ongoing trade sanctions instituted by the European Union and the United States, the Russian Federation has applied countersanctions, which have adversely affected agricultural exports to Russia.
Russia’s positive balance of trade numbers since the late 1990s make the country a consistent net exporter, which would make the Russian economy subject to the adverse effect of trade wars, tariffs and the failure of key trade agreements. According to the World Bank, the Russian Federation had a very low 26.1% ratio of its trade to GDP numbers in 2017, which makes the Russian economy quite resilient against trade disruptions.
The World Bank gave Russia a rather poor ranking of 99th for trading across borders. Other somewhat unfavourable aspects for doing business in Russia include protecting minority investors, resolving insolvencies and paying taxes, for which it ranked at 57th, 55th and 53rd respectively in those areas.
In summary, while businesses may feel somewhat secure about operating in Russia, traders should remain careful when using local Russian forex brokers due to the historical presence of fraudulent operations there and overly favourable advertising regarding the benefits of forex trading.
Russia nevertheless has a decent ranking of 31st when it comes to the overall ease of doing business in the country, according to the World Bank. Russian financial institutions and brokers are also overseen by the AFD and the Bank of Russia (CBR), which releases new financial regulations from time to time.
Traders seeking to trade via an online broker should review their list of assets, reputation, trading platform features and regulatory oversight to make sure they are suitable. A broker worthy of trusting with a margin deposit should also keep their clients’ money separate from their own funds for added security in case a financial issue arises.