The Bank of Russia intends to regulate the activities of online services for the sale of securities, as well as the conclusion of contracts that are instruments with a “financial lever.” To do this, it is proposed to expand the concept of dealer activity and oblige companies that offer customers such services to obtain a corresponding license. Sites of unlicensed players can be blocked.
The Central Bank considered the current regulation of dealership activities obsolete and suggested incorporating several new concepts into it. The proposals are contained in the consultative report “Improving Dealer Activity” published on Monday on the Bank of Russia website. In the legal field, it is planned to introduce services for retail sales of complex financial instruments, as well as the activity of online stores selling securities and financial marketplaces.
The main reason for the change in the regulation model of dealership activity, the report says, “is the vulnerability of investors’ rights and interests, which has increased as a result of the spread of financial instruments not covered by regulation and technologies for the remote use of trading platforms.” As part of this idea, the Bank of Russia intends to expand the concept of dealer activity through contracts that are instruments with a financial lever. Currently, the concept of dealer activity includes only the purchase and sale of securities on the basis of public hard quotes, carried out at their own expense.
Under contracts that are instruments with a financial lever, the Central Bank understands transactions in which there is no supply of a basic asset, and the economic interest of the parties is to obtain a financial result that depends on the price of this underlying asset (for example, roll-spot (RS) and CFD-contracts). “Now foreign companies can offer all these products, since this activity is not licensed in Russia.The new mechanism that we propose will force the company to obtain licenses, “said Olga Shishlyannikova, deputy director of the Securities and Commodity Market Department of the Central Bank, (quoted by TASS). According to the Central Bank, now in Russia, financial products on a regular basis sell over 200 foreign companies via the Internet. According to Ms. Shishlyannikova, in order to provide similar services to the Russians, a foreign company will have to open a subsidiary in Russia and obtain a dealer license.In this case, the regulator will have grounds for blocking the sites of violators. In addition, the Central Bank plans to introduce criteria by which it will be possible to classify one or another activity in the securities market as a professional dealer activity. The first of them is a public offer on the basis of which the contract is concluded, the second is the regularity of concluding such contracts with an undetermined number of persons via the Internet with the help of programs allowing investors to submit bids for concluding deals with a specific dealer.
According to Timur Turlov, the general director of Freedom Finance (owns the Internet site for the sale of shares of Freedom24.ru), all key players of the Russian market offering their services in buying and selling financial instruments through online platforms already have dealer licenses; therefore, for them formally nothing will change. “The Central Bank seeks to patch up a hole in the law so that only professional participants in the securities market can conduct this activity.And this is in line with the global trend of regulation, “he said. The new approach will restore justice to licensed Russian forex dealers, who are compelled to compete with representatives of the unregulated gray market.”We welcome the expansion of the product line for professional participants, including contracts for difference, while taking measures to tighten up activities with companies offering Internet services on behalf of organizations that are not licensed by the Bank of Russia,” said the head of the Association of Forex Dealers (accredited SRO) Evgeni Masharov. According to him, this will make it possible to transfer clients from offshore jurisdictions to the legal field of the Russian Federation without serious consequences.