Will Elvira Nabiullina deprive forex dealers of unqualified investors?

Uneducated investors have no place at Forex

Last week, the Central Bank has launched a new initiative, according to which the access to Forex trading for the unqualified investors must be limited. In other words, the regulator wants to divide the players into three categories: professional, qualified and unqualified. According to RBC, Deputy Chairperson of the Central Bank Sergey Shvetsov has made a similar statement.

In addition, the speaker criticized the attitude of the Russian brokers to the private investors. According to him, their current business model has led to the fact that the number of active accounts is limited to 80 thousand, and the average life of this account is only 9 months, i.e. for this period of time a person loses all his savings that, by the way, is not a problem for the brokers themselves.

In this situation, the experts urge to change the model and standards for sales of financial products, in order to bring them closer to Western ones, as the business model 'squeezing' the client is doomed to failure in long-term prospect. According to the recommendations of Shvetsov, before selling a financial product, the seller should understand whether it really suits the consumer. If not, they should explain to the customer how the product works or even refuse from its sale. However, the problem is not just that brokers don't want to teach how to invest, often customers want to speculate themselves and make quick money.

'The brokers are interested in getting money from a client'

We turned to the experts in the field of the stock market and to investors who have already had sad experience of the speculation, in order to figure out how the regulator will determine the player's skill, what will be a control mechanism and how effective the new initiative of the Central Bank is.

Bogdan Zvarich — an analyst at Finam Holdings:

'We see an attempt by the Central Bank to protect private investors from losses they may have on the market. This market is quite harsh because a very large leverage. And it's still not really investments, and, accordingly, many people incur losses. Especially it is bad when an unskilled person goes to Forex without having any experience. The Central Bank is doing everything to protect investors — on the one hand, from fraud brokers (it is the introduction of licences, monitoring), and on the other hand, from the investors themselves, who have no experience. It tries to make so that small private investors without experience could not enter the market.

It also should be noted that now, unlike what it used to be, the regulation is being enforced yet, because there had been a lot of trouble – the dealers acted in bad faith. Now there is no such situation, as there are regulations, licensing of dealers in this market, there is some supervision by the Central Bank, is where to turn to.

There is a clear set of signs of a qualified investor that has been existing for a long time. I now can't remember offhand, unfortunately. It is indicated by the Central Bank. On these grounds, in fact, probably there will be the definition. Those who do not fall under these signs will be unqualified. And, most likely, the Forex dealer will determine whether to give access to a specific person.'

Denis Gromov — a Kazan private trader:

'Actually, if to remember China, where about 10-20% of inexperienced people who even could not write and read but registered at the stock exchange, they had serious problems… I believe that such limitation is logical and appropriate. At least, there should be some kind of educational programme. The investor should receive a certificate, take a course, pass exams, only then he or she will be admitted to trading. Because the situations such as one that happened to me… Many people say to me that I impacted the dollar rate, but imagine if it's of national scale.

As for the educational programme, I can't tell for everyone — I've talked to Alfa-Bank and to other company. Unlike Alfa-Bank, the second company very often called me, offered something, but the result was the same: the money that I had, they all 'disappeared'.

The brokers are interested in getting money from a client. They will either earn from commissions or they will just 'extract' money. Earlier, any forex office with an authorized capital at 10,000 rubles could exist and raise money through Yandex.Money or WebMoney, without bringing money to the stock exchange at all… According to the statistics, about 98% of people money are 'drained' by them. Accordingly, why bother, why withdraw money to the exchange, to pay commissions if people will 'drain' money anyway — if not now, then later. And the people are gamblers by nature…'

'Forex market is not, so to say, white'

Nikolay Laptev — the director of Kazan branch of the broker house Otkrytie:

'The difference between Forex and stock market which Moscow interbank currency exchange offers in that it is a public auction, and the option that Forex offers still is not quite, so to say, white. Under the Russian law, it is still not regulated, there are a lot of things legally flawed. Therefore, I believe that the initiative will have a positive impact on that those people who want to trade will come to the 'white' area.

Particularly we provide access to currency trades, and there is a very high activity, which allows people to make fairly good money on the movements of currency pairs. From the point of view of risks — they are limited, as marginal leverages in our market are only 1:6, whereas Forex offers a huge leverage — 1:100. So I think it's a good step that can prevent inexperienced investors from taking unreasonable steps.

An unskilled investor is a person who knows how to do in the market or for the first time came there and wants to trade. The person who never experienced it, see a trading system, and in the eyes there is complete incomprehension. We can immediately understand that he is unskilled. We advise all people that want to push buttons by themselves and to participate in the movement to learn first. If a person is unwilling to learn and says 'I'll do it myself', then in 95% of cases he does everything wrong.

I think that the supervisory authority will impose certain requirements on the organizer of trading market Forex and will strictly control this subject. They will control, check these sites that will lead to the fact that unskilled people will cease to appear there. The Forex, in my opinion, after this, will be more 'white'.

From the point of view of legislative controlling acts, it will be more specified, but I think it is will happen not so quickly because it's quite a long process. Constant dropping wears away a stone, as they say, so I hope that after some time it will be more beautiful and orderly.'

Sergey Kozlovsky— the head of the analytical department of Grand Capital:

'Such talks about the restriction of access of Russians to the international monetary market have long been taking place, however, in our opinion, the initiative is inefficient and hard to implement. It is needed, perhaps, only to the Central Bank, as in reality the qualified investors may not have sufficient experience to work in the market, therefore, be exposed to the risk of losses due to inadequate or risk transactions with financial assets.

Why they are talking about exactly of Forex — it's simple, it is, perhaps, the only of the organized markets which still is not regulated. Entered into force this year federal law on its regulation has many complaints and is not actually implemented. Forex itself is, unfortunately, received a bad reputation due to the active use of its assets by pyramid schemes and scams, and again — due to the lack of regulation.

As for the companies providing services for the access to foreign exchange trading, of course, it will be more difficult for them to provide services in Russia. Probably, new players who have not taken their niche will leave or will be absorbed by the big players.'

Vladislav Kovalchuk— a member of the Board of Directors Alpari:

'We support the actions of the Central Bank of Russia on improving the regulatory field of Forex industry, including in relation to the protection of interests of citizens. I hope that both the mega-regulator and the Forex dealers will soon begin to discuss the details of the new initiative. This will allow both sides to clearly distinguish and designate, for example, as in this case, the criteria of the term 'qualification of a private investor'.