How does the new secure in Russia work? Nuances of a framework contract

The Forex market in the Russian Federation began its work on May 15, 2017, when the first -dealers began to accept their clients. For the most part, the formal, but important enough stage was the registration of framework agreementwhich defines the relationship between the company and the trader.

What is a framework contract in the Forex market in Russia and what is it for?

According to Clause 6, Article 4.1 of the Federal Law "On the Securities Market" a framework agreement must be concluded between a -dealer and individuals who are not individual entrepreneurs, which determines general conditions of binding relations between the parties. Detailed conditions of this agreement are made within the frameworks of separate agreements, which are concluded by means of quotation of the -dealer and submission of orders by these individuals on the basis of and in pursuance of the framework agreement.

Any additional terms limiting the liability of the dealer, written by the company itself within the contract are null and void, i.e. in case of a dispute the company will not be able to refer to them. Example terms and conditions of a framework agreement are contained in basic standard, which was developed by the Association of Dealers (a specialized SRO) and approved by the Bank of Russia.

The main advantage of a framework agreement

The main advantage of a framework agreement is that is a standardized document for the entire Forex industry in the Russian Federation. The framework contracts of different -dealers may differ only in the capabilities of these companies and the individual conditions. For example, a certain -dealer provides quotes on 10 currency pairs, and the other on 20. There will also be differences in rates, minimum lot size of the traded currency, minimum collateral level, etc.

Regarding fees and commissions, it has been stipulated that both positive and negative fees can be charged for transferring a position to the next day. It depends on the interest rate difference of the base currency country.

Bank of Russia on the guard of the rights of clients-dealers

In general, the Bank of Russia has taken care to ensure that all the rights of clients are documented, and -dealers are aware of the level of their responsibility to them. In particular, the text of any framework agreement must contain the following important provisions:

-the dealer has no right:

1. Conclude separate contracts without the client's application, which must contain the mandatory essential conditions and other parameters established by the framework contract.
2. Within five seconds, conclude separate contracts on different terms with different clients similar in type, underlying asset, price, volume (volume range) and direction (purchase or sale of the underlying asset). The specified period of time is calculated from the moment of conclusion of the first separate contract concluded on the corresponding conditions.
3. Unilaterally change the terms of a separate contract after its conclusion.
4. To unilaterally terminate a separate contract.

The duties of the dealer include write-off of client's funds according to the client's order on time at the latest within 2 working days from the date of receipt of such an order.

Penalties for failure to fulfill obligations in the Forex market

For non-fulfillment of monetary obligations, the parties may be imposed a fine in the form of forfeit (penalty), but not more than 0,1% of the amount of non-performed or improperly performed obligation for each calendar day of delay. In addition, interest shall be charged on the amount of the debt, in case of evasion of the return of funds improperly withheld, at the key rate of the Bank of Russia for the duration of the obligations. Also, any losses are subject to compensation, regardless of the amount of the penalty.

One of the most important points: in case of insufficiency of funds of the client for fulfillment of obligations to the -dealer on the special section of the nominal account or on a separate nominal account of the client, these obligations are considered as extinguished. That is, in this case, the entire amount is deducted from the client's account, and the missing part is not claimed, but simply written off to the company's loss. Thus, the -dealer himself must make sure that the client has enough money to settle with him, set the correct limits. The client will not owe the -dealer if he suddenly gets a loss exceeding the size of his account.

Quotation providers and slippage

The text of the framework agreement contains provisions describing price slippage. In the case of execution of the client's order by the market, the decision on the price is made by the -dealer without additional coordination with the client. This means that the final execution rate of an individual contract (order) may be different from what the client saw in his ITS MetaTrader or any other at the moment of order sending. The period of validity of such an application is determined by the dealer. At the moment, for example, this period is 1 day at the company "FINAM FOREX" and up to 2 days at VTB24 The settlement of an application is made within no more than 5 days - no more than 2 days in the case of FINAM FOREX and no more than 5 days in the case of VTB24.

The client must be notified of the source of formation of quotations - the dealer. In other words, the client must know where the dealer gets his quotes fromwhich are provided to him in the online mode. The list of quoted currency pairs must also be known. It is defined in the text of the framework contract.

Level of collateral and leverage

An important point concerns the collateral that the client provides for the execution of his applications. According to the framework agreement, It is the client's responsibility to monitor the adequacy of the collateral. The minimum ratio of the value of collateral to the value of liabilities is determined by the dealer. At FINAM FOREX this value is 1 to 40. Forced fulfillment of obligations is carried out in case the value of collateral decreases to the level of 1 to 47.5. It is 1 to 45 and 1 to 50 for VTB24, correspondingly. In addition, dealers have the requirement to maintain a minimum amount of funds on the account for the conclusion of a separate contract.

Also - the dealer has the right to set a limiting level of collateral, at which he makes a demand to the client to increase the amount of collateral. The minimum amount of time within which the client can provide the required collateral is 5 minutes. These conditions were not found in the text of the framework agreement between FINAM FOREX and VTB24.

Risk notification and reports for customers

When choosing a dealer, don't forget that It is his responsibility to notify his clients of all risksto which it is exposed. The list of risks of FINAM FOREX and VTB24 is reflected in Appendix 1 and Appendix 5 to the text of the framework agreement, respectively.

Rather important requirements for Russian dealers are Reporting for their clients. The report shall reflect the result of all conducted operations (trading and non-trading) on all accounts opened for the client. At the request of the client the report is provided no later than 10 working days from the date of receipt of the request, as well as at least once a month within the first 5 working days from the date of formation of the report.

If the report is provided on paper, by putting his signature on it the client confirms all the operations reflected in the report. In case of disagreement with the data of the report, the client must send a claim or reasoned refusal in writing to the dealer within 3 working days from the date of submission of the report.

Total

Speaking of the formed legal system of the market Forex in RussiaThe Bank of Russia has spent so much time establishing, we can say that compared to the unregulated foreign exchange market, the clients-dealers look much more protected.

Under the wing of the Central Bank of the Russian Federation, it may indeed become possible to affordable and safe . Strict supervision of -dealers and the ability to file a complaint against them with the regulator provides almost 100%-perfect protection for customers while preserving their rights and the real responsibility of -dealers.

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