The Russian Federation is a huge political, economic and financial power, and an ever-growing market for different financial instruments with thousands of active traders. The Forex market is not as regulated as one would hope, though, and there are many institutions such as Ministry of Finance and the Central Bank, but no clear regulatory system or acts. There is no actual legal agenda for the regulation of the markets and the Forex brokers in Russia are actually able to operate legally without regulation. There are changes looming but the supervision of the market and the direct interaction with the traders is currently left to independent and non-governmental regulatory bodies.
The FMRRC Regulation
The Financial Markets Regulation Center is a regulator with partner or rather member brokers, with no actual legal powers to regulate. However, the organization is trusted and has a reputation as one of the best regulators in the Russian Federation. The FMRRC regulated Forex brokers are observed and authorized according to strict standards in order to create a consistent and more reliable market for the end-customers. There are regulations and decisions by the FMRRC which certified brokers follow in order to provide the best possible service. The agency can ultimately grant and revoke the memberships and independently assess the markets and financial organizations. The FMRRC also holds a compensation fund for any potential losses customers suffer as results of fraudulent conduct by FMRRC regulated brokers, which is definitely a great tool for Russian Forex traders.
Limited Scope of Power
Although FMRRC is seen as an established and trustworthy organization, its actual scope of power is quite limited. Being non-commercial, non-governmental body, it lacks proper resources and authorizations to deal with rogue brokers. The best they can do is keep current and prospective clients informed and revoke licenses of FMRRC regulated Forex brokers found in violation of rules. Forex brokers who decide to register with FMRRC will do so by paying a membership fee. This means that, should a broker decide to leave, or if it is removed from the membership, the organization loses money. Although one wants to believe that FMRRC has traders’ interests in mind, this raises a question of the conflict of interest. While the organization does list certain requirements, which are described below, it lacks proper authority to check if these requirements are, in fact, being implemented. So, FMRRC regulated Forex brokers are often taken at their word that they are running a fair and honest business. The idea itself is nice, but the implementation is certainly lacking.
Requirements for FMRRC Regulated Forex Brokers
On their main website, FMRRC lists the requirements it imposes on Forex brokers with their license and explains how they (try to) protect the traders. They claim that brokers have no way of influencing their decisions and their licensing process is fair and unbiased. The organization deals with evaluating financial operations of regulated brokers, they certify various activity, and serve as an outlet for clients to lodge their complaints. On the home page of the site, traders can find a list of false FMRRC regulated Forex brokers, who forged the license and claim to be a part of the organization, while they are actually not. At the same time, however, it is impossible to find a list of Forex brokers regulated by FMRRC. This is one of the things that annoy the traders the most. For all the transparency they claim, the organization fails to provide clear and concise list of brokers they’ve issued a license to.
What is the Compensation Fund?
Probably one of the best things about FMRRC is the fact that you will have an access to their Compensation Fund when dealing with one of the FMRRC Forex brokers. Access to funds is enabled when it is discovered that one of the certified brokerage companies broke the rules and, as a result, clients lost money. In the events like this, the FMRRC board decides on the client’s claims and, if they are found justified, they will initiate a compensation payment, deliverable within 10 business days. The idea certainly looks good on paper, but there is still a question how fair and unbiased the company can be since any payout is, again, a hit on their own financials.
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Advantages of FMRRC Brokers
The Forex and financial brokerage generally in the Russian Federation are not yet fully regulated and controlled, as Forex brokers in Russia can still provide services with no authorization. However, there are independent regulatory bodies such as the FMRRC who provide authorization, advice, and even remedy measures to help the traders and provide market stability. The FMRRC regulated brokers will usually provide a reliable, safe and secure environment for Russian traders to effortlessly enjoy trading at its best. The trading software, liquidity providers, banking options and customer support are all of high standard and many Forex brokers in Russia are also regulated elsewhere which further improves the transparency and the promised consistency through more strict regulation. While there are serious moves towards the formalization of more strict government-controlled regulation systems, there are still some issues that needs to be resolved when it comes to Forex brokers in Russia. FMRRC is a decent regulatory body with a good idea, but the government needs to provide them (and / or other bodies) with more power to make them effective and more relevant in the market.