Regulation of financial operations on the market

Be a trader: fundamental analysis

Operations related to the purchase and sale of currencies are of a purely financial nature and must be regulated by the state. The characteristics of the regulation depend directly on the jurisdiction under which the mechanism for conducting such transactions falls.

Other articles of stock exchange liquor

• Christmas rally: stock market New Year miracle
• Мастер-классы — IPO: прибыль или убыток?
• Inflation and deflation: two sides of the same coin

Legal framework for financial transactions

It is worth noting at once the curious fact that the provision of "currency dealing services on the market" in itself does not fall under licensing anywhere. This type of operations usually has a broader meaning: operations with foreign currencies, operations with the futuresgambling operations. On this basis, ForTrader.org recalls, they consider the need to apply state supervision and regulation to them.

Obviously, the execution of transactions in the market affects the provisions of legal acts on currency control. These provisions may vary from state to state.

And the difference, it should be noted, is significant. In countries with a strong currency, for example, the euro or the dollar, there is no such regulatory measure as exchange control in principle. In countries with non-convertible or limited convertible currencies, the situation is the opposite. There are serious restrictions on transactions with foreign currencies, which are an obstacle to the organization of currency dealing.

At first glance, it may seem that operations in the foreign exchange market and the securities market are identical, but this is not the case. Assets traded on these markets are different in most parameters. After all, the "quality" of traded currencies, unlike securities, does not need any government control measures.

Accordingly, the basic principles by which the securities market is regulated are, for the most part, completely inapplicable to the foreign exchange market, and operations on these markets are controlled by various governmental organizations. In Russia, for example, it is Central Bank of the Russian Federation и Federal Commission for the Securities Market.

Dealing Centers: the horse's play

Everything is beautiful in theory, but Slavs are not the people to follow the rules and laws clearly. As the Prime Minister of the Russian Empire P.A. Stolypin used to say, in Russia the strictness of laws is compensated by the non-binding nature of their execution. For the organization of currency dealing in the CIS countries there was developed a solution, which can be classified as witty. It brings currency transaction issues into a completely different legal arena. It should be noted that this approach is mainly characteristic of dealing centers that have proliferated like mushrooms after the rain, where the real operations with currencies may not be discussed at all.

In such DCs, all client transactions are processed on the server belonging to the dealing center. Only some deals are displayed on the real interbank market and only as an exception, when there is a threat of a significant imbalance between the volumes of buy and sell orders. In most cases, clients of such DCs simply play against each other and the dealing center itselfwhich sets the current value of quotations. By and large, there is an organization of an "economic game" for real money.

That is, a person who considers himself a "currency trader", roughly speaking, bets on changes in the currency exchange rate and either loses or wins. Thus, such activity is interpreted as certain type of gamblingfor which the dealing center obtains the appropriate license.

Naturally, the possibility of realizing such an option follows from the state's broad definition of the concept of gambling business, which includes such operations. In countries with a well-established legal culture, the legislation always conducts a a clear distinction between the financial and gambling spheres.

Needless to say, for those who have decided to engage in currency trading in earnest, such a decision is categorically inapplicable.

How to distinguish a real broker from a pseudo-DC is a topic for a separate discussion. Unlike "kitchens", the activities of -brokers who bring client transactions to the real market are strictly regulated by the relevant financial regulators, about which you can learn more at our website.