A dealer's and forex dealer's lines of business are expanding
Pepeliaev Group advises that, on 23 March 2024, Federal Law No. 50-FZFederal Law No. 50-FZ "On amendments to the Federal Law 'On the securities market' and article 11 of the Federal Law 'On amendments to individual items of legislation of the Russian Federation'" dated 23 March 2024.
was published, which provides for changes in the operations of dealers and forex dealers.
The changes are aimed at stimulating investment activity in general and hedging the risks of professional participants in the securities marketExplanatory note to draft law No. 372029-8.
.
Business of a dealer and forex dealer
From 20 September 2024, a dealer will haveDate on which the relevant provisions of Federal Law No. 50-FZ come into force.
the right to make not only transactions for the sale and purchase of securities, but also to enter into contracts that are derivative financial instruments ("DFIs"), both on a stock exchange (except for DFIs with goods as their underlying asset) and in off-exchange trading, provided that contracts involving DFIs are concluded with individuals who are not individual entrepreneurs ("IPs"), and the performance deadline under such contracts does not occur until the third day after the day when they are entered into.
The field of a forex dealer's business is also expanding. In addition to the right to enter into short-term contractsThat the parties must perform (or otherwise discharge) before the third day after the day when they are entered into
, which are DFIs with individuals who are not IPs, such dealer will also be able to conclude contracts where the underlying asset is not only a foreign currency or currency pair, but also securities, goods and precious metals.
To manage the risk of losses, forex dealers will be able to enter into hedging agreements.
Comment
Despite the widespread use of hedging transactions on the securities market, this term has been used in the Securities Market Law for the first time and specifically in relation to hedging transactions5 of a forex dealer.
Hedging refers to transactions (or a combination of them) with DFIs made to reduce adverse implications that may arise for a forex dealer due to losses or an increase in obligations under contracts that such dealer has concluded.
Additional powers
Whether or not a forex dealer recognises]a person as a qualified investor now affects the amount of collateral that such person has to provide.
If contracts are concluded with an individual who is not an IP and is not a recognised as a qualified investor, then the ratio of the collateral amount that the person provides to a forex dealer to the amount of its obligations becomes greater (1 to 30 or 1 to 40, respectively, depending on the type of contract).
If a forex dealer has recognised a person as a qualified investor, the requirements for this ratio remain at the same level (1 to 50).
The dealer also receives the authority to recognise a person as a qualified investor in the manner established by the Central Bank of Russia ("CBR")The CBR's Instruction No. 3529-U dated 29 April 2015 "On persons being recognised as qualified investors and the procedure for keeping the register of persons recognised as qualified investors."
.
What to think about and what to do
The law will come into force in full on 20 September 2024.
Participants in the professional securities market operating as dealers or forex dealers are advised to provide for these changes in client's and internal documentation, consider the possibility of introducing new financial products, and check their operations for compliance with the requirements of the CBR's regulationsBank of Russia's Instruction No. 6032-U "On situations when contracts that are derivative financial instruments, in which one of the parties is not a person acting as a central counterparty, are entered into off-exchange and the performance of obligations arising from such contracts requires a collateral, as well as on the requirements for such collateral" dated 23 December 2021.
.
Help from your adviser
Pepeliaev Group's experts have extensive experience in the field of regulation of the securities market, advising on licensing requirements for professional participants in the securities market, as well as on their operations.
We are ready to provide comprehensive legal support to participants in the professional securities market and their clients, as well as to give recommendations on how to comply with the CBR's regulatory requirements.
Translated by the Translation Department of Pepeliaev Group.