On March 7, 2016, a new regulation on forex operations in Belarus has come into force. Before this date, the activities of forex companies in the country were not regulated, and the absence of explicit definition created a risk that forex brokers’ operations could be classified as illegitimate activities.
Join the industry leaders at the Finance Magnates London Summit, 14-15 November, 2016. Register here!
Understandably, this confusion will extend until the industry players come to grips with the policy set to control foreign exchange companies in Belarus. Accordingly, and based on high interest in this jurisdiction, the Financial Commission published a detailed report to answer its members’ inquiries asking to explain the key provisions and regulation specific in Belarus.
The report justifies the industry interest with incomplete, incomprehensible and expensive regulation in Russia, as well as absence of feedback from its ‘mega-regulator’, the Central Bank of Russia, regarding the industry prospects.
Additionally, the report describes Belarus’s forex regulations as “favorable and comprehensible” and that it has a great chance to make this jurisdiction a forex haven for the entire Commonwealth of Independent States (CIS) region. It is also worth mentioning that forex traders working with Belarus-registered firms are absolved from income tax until January 2019, making work even more attractive for participants from other countries of the world.
In order to launch operations in Belarus, forex brokers are required to acquire a licence issued by the National Bank of the Republic of Belarus (NBRB), which allows them to be included in the register of forex companies. The second step is to undergo an assessment of their Trading Platform in the National Forex Center, an institution established by the Council of Ministers together with the central bank. Concerning the financial terms, forex companies must have a capital of at least BYR2 billion (about US$129,000), and to deposit a guarantee payment to the Compensation Fund to the amount of $55,000.
Thirdly, the licensed forex broker is obliged to become a member of the local Association of Financial Market Development - ARFIN. Other specific requirements for these companies include the obligation to incorporate a local entity to obtain a licence from the central bank.
Since the adoption of the forex legislation in Belarus, only six brokers and one of the national banks have been included in the register of forex companies by the National Bank of the Republic of Belarus. The NBRB’s list of forex brokers includes Forex Club, Open Investments, TeleTradeBel, FTM Brokers, Alpari Eurasia and Gerchik &Co.
The table below outlines the key findings of the Financial Commission overview of Forex market in Belarus.
| Financial requirements |
| Min. capital | ~$103,000 | Funds must be allocated on the company’s account in one of the local banks
|
| Compensation fund payment | $55,000 – guarantee fee + calendar fees in amount of 5% of the amount of total liabilities towards clients. Important! When the total amount of the company’s clients funds is reduced, the calendar fees are paid back to the company. | Funds are transferred to the National Forex Center and allocated on deposit in a local bank. |
| Risk Management and risk capital | Yes | Regulation has fairly strict risk management requirements which implies that the maximum size of own, not overlapped total position for each instrument may not exceed the amount of equity capital of the dealer. In fact, if the dealer does not have large equity capital, then almost all client positions should be hedged on an external counterparty. At the same time, regulation is quite flexible in choosing of counterparties and permits transactions with foreign companies. |
| Trading conditions |
| Max. leverage | ● Client 1:100
● Qualified client 1:200
● Professional client 1:500 | Professional client
● Local forex company and (or) with licence to carry out insurance activity, banking and exchange activity regarding securities;
● Non-resident legal entities licensed to operate on OTC forex market and carry out banking or other financial activity;
● The income of legal entity reduced by taxes and fees for the last fiscal year amounts to at least 4 million base units*;
● The total amount of company’s accounting balance by the end of the last fiscal year amounts to at least 2 million base units*;
● Equity capital of the legal entity by the end of the last fiscal year amounts to at least 200 thousand base units*;
Qualified client - legal entity or individual that:
● Conducted at least 10 transactions totalling more than 10 thousand base units* within each of the last four quarters.;
● The amount of client long-term and short-term investments, including cash, by the first date of the current month is more than 10 thousand base units*;
Client - usual client who has minor trading experience or does not have any experience at all.
*Base unit amounts to 21 Belarussian ruble or 10.83 USD |
| Instruments | FX and CFD |
| Trading accounts in different currencies | Yes |
| PAMM accounts | No | The regulation does not have any specific requirements for asset managers, however, forex dealers can not represent independent managers on their websites and must not participate in negotiations between investors and managers. |
| Copy trading | Yes | No additional requirements for dealers |
| Market making | Yes | Accepted risks must correspond with company’s equity capital, if the established normative is exceeded, a mandatory withdrawal of positions on the counterparty must be carried out (see requirements for risk management) |
| STP | Yes | Withdrawal on foreign brokers is possible |
| Clients’ and own funds. Choise of counterparties |
| Segregation of client’s funds | No |
| Allocation of client’s funds on foreign banks and financial companies
accounts | Yes | 50% of clients’ funds must be allocated on local bank account |
| Using of client’s funds for hedging transactions abroad | Yes | Not more than 50% of clients’ funds may be allocated on counterparties’ foreign accounts for hedging and direct withdrawal of orders |
| Allocation of own funds abroad | Yes | All company's funds for hedging transactions abroad |
| Requirements for foreign counterparties | Yes | Foreign counterparty should be an American, Japanese or Russian company with profile licence (permission), as well as company with a licence (permission) obtained in the European country applying provisions of MIFID.
In addition, the counterparty may be a company from another jurisdiction, which is not offshore, if the performance of its obligations towards the forex company is guaranteed by the bank or other entity which financial viability is confirmed by the auditor's report.
Forex company may hedge transactions, in amount not exceeding 5 percent of the amount of client funds, in any foreign company which equity capital amounts to at least 5 million euros, as well as in parent company in any amount, but at its own expense.
|
| Sales and marketing |
| Forex services advertising requirements | Yes | Prohibition of guaranteed income promises, mandatory risks warning, prohibition on usage of information that is not evidenced documentary, etc. |
| Sales ethics control | No | Indirectly (see advertising requirements) |
| Opening of own offices | Yes | No specific requirements for office operating activity |
| Introducing brokers | Yes | No specific requirements for introducing brokers |
| Personnel professional requirements |
| Director | Yes | Higher legal or economic education, no criminal record (unserved), absence of facts of initiation of criminal proceedings, as well as dismissal due to loss of confidence |
| Internal Control Officer | Yes | Higher legal or economic education, no criminal record (unserved), absence of facts of initiation of criminal proceedings, as well as dismissal due to loss of confidence |
| Dealer | No |
| Sales | No |
| Taxes and other fees |
| Annual fee | No |
| Reporting to the depositary (the National Forex Center) | Yes | ~$ 1,230 monthly. |
| Company income tax | Yes | Reduced rate in amount of 9% until 2019, afterwards 18%. |
| Function of a tax agent | No
| The Company does not levy taxes from customers.
|
| Clients income tax | No | No income tax on forex trading until 2019. Afterwards 13%. |
On March 7, 2016, a new regulation on forex operations in Belarus has come into force. Before this date, the activities of forex companies in the country were not regulated, and the absence of explicit definition created a risk that forex brokers’ operations could be classified as illegitimate activities.
Join the industry leaders at the Finance Magnates London Summit, 14-15 November, 2016. Register here!
Understandably, this confusion will extend until the industry players come to grips with the policy set to control foreign exchange companies in Belarus. Accordingly, and based on high interest in this jurisdiction, the Financial Commission published a detailed report to answer its members’ inquiries asking to explain the key provisions and regulation specific in Belarus.
The report justifies the industry interest with incomplete, incomprehensible and expensive regulation in Russia, as well as absence of feedback from its ‘mega-regulator’, the Central Bank of Russia, regarding the industry prospects.
Additionally, the report describes Belarus’s forex regulations as “favorable and comprehensible” and that it has a great chance to make this jurisdiction a forex haven for the entire Commonwealth of Independent States (CIS) region. It is also worth mentioning that forex traders working with Belarus-registered firms are absolved from income tax until January 2019, making work even more attractive for participants from other countries of the world.
In order to launch operations in Belarus, forex brokers are required to acquire a licence issued by the National Bank of the Republic of Belarus (NBRB), which allows them to be included in the register of forex companies. The second step is to undergo an assessment of their Trading Platform in the National Forex Center, an institution established by the Council of Ministers together with the central bank. Concerning the financial terms, forex companies must have a capital of at least BYR2 billion (about US$129,000), and to deposit a guarantee payment to the Compensation Fund to the amount of $55,000.
Thirdly, the licensed forex broker is obliged to become a member of the local Association of Financial Market Development - ARFIN. Other specific requirements for these companies include the obligation to incorporate a local entity to obtain a licence from the central bank.
Since the adoption of the forex legislation in Belarus, only six brokers and one of the national banks have been included in the register of forex companies by the National Bank of the Republic of Belarus. The NBRB’s list of forex brokers includes Forex Club, Open Investments, TeleTradeBel, FTM Brokers, Alpari Eurasia and Gerchik &Co.
The table below outlines the key findings of the Financial Commission overview of Forex market in Belarus.
| Financial requirements |
| Min. capital | ~$103,000 | Funds must be allocated on the company’s account in one of the local banks
|
| Compensation fund payment | $55,000 – guarantee fee + calendar fees in amount of 5% of the amount of total liabilities towards clients. Important! When the total amount of the company’s clients funds is reduced, the calendar fees are paid back to the company. | Funds are transferred to the National Forex Center and allocated on deposit in a local bank. |
| Risk Management and risk capital | Yes | Regulation has fairly strict risk management requirements which implies that the maximum size of own, not overlapped total position for each instrument may not exceed the amount of equity capital of the dealer. In fact, if the dealer does not have large equity capital, then almost all client positions should be hedged on an external counterparty. At the same time, regulation is quite flexible in choosing of counterparties and permits transactions with foreign companies. |
| Trading conditions |
| Max. leverage | ● Client 1:100
● Qualified client 1:200
● Professional client 1:500 | Professional client
● Local forex company and (or) with licence to carry out insurance activity, banking and exchange activity regarding securities;
● Non-resident legal entities licensed to operate on OTC forex market and carry out banking or other financial activity;
● The income of legal entity reduced by taxes and fees for the last fiscal year amounts to at least 4 million base units*;
● The total amount of company’s accounting balance by the end of the last fiscal year amounts to at least 2 million base units*;
● Equity capital of the legal entity by the end of the last fiscal year amounts to at least 200 thousand base units*;
Qualified client - legal entity or individual that:
● Conducted at least 10 transactions totalling more than 10 thousand base units* within each of the last four quarters.;
● The amount of client long-term and short-term investments, including cash, by the first date of the current month is more than 10 thousand base units*;
Client - usual client who has minor trading experience or does not have any experience at all.
*Base unit amounts to 21 Belarussian ruble or 10.83 USD |
| Instruments | FX and CFD |
| Trading accounts in different currencies | Yes |
| PAMM accounts | No | The regulation does not have any specific requirements for asset managers, however, forex dealers can not represent independent managers on their websites and must not participate in negotiations between investors and managers. |
| Copy trading | Yes | No additional requirements for dealers |
| Market making | Yes | Accepted risks must correspond with company’s equity capital, if the established normative is exceeded, a mandatory withdrawal of positions on the counterparty must be carried out (see requirements for risk management) |
| STP | Yes | Withdrawal on foreign brokers is possible |
| Clients’ and own funds. Choise of counterparties |
| Segregation of client’s funds | No |
| Allocation of client’s funds on foreign banks and financial companies
accounts | Yes | 50% of clients’ funds must be allocated on local bank account |
| Using of client’s funds for hedging transactions abroad | Yes | Not more than 50% of clients’ funds may be allocated on counterparties’ foreign accounts for hedging and direct withdrawal of orders |
| Allocation of own funds abroad | Yes | All company's funds for hedging transactions abroad |
| Requirements for foreign counterparties | Yes | Foreign counterparty should be an American, Japanese or Russian company with profile licence (permission), as well as company with a licence (permission) obtained in the European country applying provisions of MIFID.
In addition, the counterparty may be a company from another jurisdiction, which is not offshore, if the performance of its obligations towards the forex company is guaranteed by the bank or other entity which financial viability is confirmed by the auditor's report.
Forex company may hedge transactions, in amount not exceeding 5 percent of the amount of client funds, in any foreign company which equity capital amounts to at least 5 million euros, as well as in parent company in any amount, but at its own expense.
|
| Sales and marketing |
| Forex services advertising requirements | Yes | Prohibition of guaranteed income promises, mandatory risks warning, prohibition on usage of information that is not evidenced documentary, etc. |
| Sales ethics control | No | Indirectly (see advertising requirements) |
| Opening of own offices | Yes | No specific requirements for office operating activity |
| Introducing brokers | Yes | No specific requirements for introducing brokers |
| Personnel professional requirements |
| Director | Yes | Higher legal or economic education, no criminal record (unserved), absence of facts of initiation of criminal proceedings, as well as dismissal due to loss of confidence |
| Internal Control Officer | Yes | Higher legal or economic education, no criminal record (unserved), absence of facts of initiation of criminal proceedings, as well as dismissal due to loss of confidence |
| Dealer | No |
| Sales | No |
| Taxes and other fees |
| Annual fee | No |
| Reporting to the depositary (the National Forex Center) | Yes | ~$ 1,230 monthly. |
| Company income tax | Yes | Reduced rate in amount of 9% until 2019, afterwards 18%. |
| Function of a tax agent | No
| The Company does not levy taxes from customers.
|
| Clients income tax | No | No income tax on forex trading until 2019. Afterwards 13%. |
