With the shocking news that the giant Russian Forex Broker Iron FX has exited the Russian market the question today about Alpari may not be so absurd. Iron FX has closed its Russian and Ukranian offices and let go almost most of the staff working in these offices. This cannot be a coincidence with the implementation of the brand new “Russian Forex Law”. The curious point is that Iron FX was instrumental in the formation of the law. The response from Iron FX is that it would be covered by an existing Ukrainian regulation that would cover the same region. You can read between the lines but it is evident that there are components to the new law that are very distasteful for Forex Brokers.
While Alpari UK is winding down its bankruptcy in the UK. The latest from KPMG is that clients will receive $0.55 on the dollar. Alpari now has returned to its roots in Russian and is operating under the Russian Forex Law. The question remains will Alpari Russia see the same issues that Iron FX has seen and move their regulation elsewhere. Publically Alapri has always been supportive of the move to regulation in Russia and like Iron FX has been actively involved in the process.
There are a few reasons why Alapri may not remain under the Russian Forex Law. The company will now be required to maintain a net capital position $1.6 million. This may not sound like a great deal but for the company that is winding down a UK subsidiary, this might be a steep price. It is also far higher than the original proposed net capital amounts of $70K – $100K. Russia is also not at the same level as an FCA or ASIC which have similar net capital requirements with more recognition than the newly established Russian Regulator. Another thing that might hurt Alpari are the new leverage limitations of 50:1 which are set and at the same level as the US. This might move clients away from a broker like Alpari to a broker that can offer 100:1 or greater. At present, the new Forex Law does not address products like Binary Options and does not all products like CFDs which are offered by brokers from the UK and Australia.
These reasons may or may not influence Alpari’s remaining under the Russian regulator. If they eventually decide to leave it will leave a large void for the newest Forex Regulator.
Trading Forex and Derivatives carries a high level of risk, including the risk of losing substantially more than your initial investment. Also, you do not own or have any rights to the underlying assets. The effect of leverage is that both gains and losses are magnified. You should only trade if you can afford to carry these risks. Trading Derivatives may not be suitable for all investors, so please ensure that you fully understand the risks involved, and seek independent advice if necessary