The Bank of Russia has stated clearly that there are no plans to ban margin trading for investors who are still learning the ropes and may be using borrowed funds. This message came during discussions at the Moscow Financial Forum, where Mikhail Mamuta, who heads the consumer protection and financial services accessibility division of the Bank of Russia, outlined the stance. The information was reported by the TASS news agency.
Mamuta emphasized that the regulator prioritizes improving the way risks are communicated to investors. Rather than restricting access outright, the focus is on ensuring people understand the potential downsides and the nature of the products they are considering. This approach aims to balance investor opportunity with better protection against careless risk taking.
There are certain trading strategies that rely on margin trading to function effectively. Mamuta noted that if a participant has access to these kinds of transactions, they should also be allowed to engage in margin trading. The key requirement is that the investor is aware of what margin trading entails and the specific risks associated with it, including the possibility of amplified losses if the market moves unfavorably.
During the discussion, Mamuta pointed out that many newcomers to the market do not fully grasp that brokers can offer leveraged deals. He suggested that beginners should verify their understanding, potentially by going through educational tests or simulations that reveal how leverage works in real time and what it means for their capital when things go wrong.
Leveraged trading involves using capital borrowed from a broker to amplify the size of a position. This mechanism, commonly referred to as margin trading, can magnify gains but also magnifies losses, creating the risk of losing the initial invested amount and more if the loan is called. The regulator wants investors to recognize these implications before stepping into such transactions.
In late June, Mamuta indicated that the regulator was considering measures to reduce the overall risk level associated with margin trading for novice investors. The aim behind these contemplated steps is to create safer conditions for people who are just starting to participate in markets, while not discouraging responsible learning and market participation. The bank is looking at a calibrated approach that preserves access to margin-enabled activities for those who demonstrate sufficient understanding and readiness, while implementing safeguards for those who may be more vulnerable to market swings.
In an additional development announced around July 20, there were strong statements about the possibility of temporarily restricting unqualified investors from increasing their exposure to foreign securities. This move would act as a throttle to prevent rapid, high-risk expansion of positions by individuals who may not yet have the experience to manage such investments. The policy would likely involve criteria that gauge an investor’s experience, prior performance, and comprehension of the risks tied to international markets, including currency fluctuations and cross-border regulatory considerations. The front line goal is to maintain orderly market functioning and to protect small investors from sudden, credit-driven losses that could cascade through the broader market.