MOSCOW, Feb 16 (Reuters) – Russia will limit retail investors’ access to complex products on financial markets from October, the central bank announced on Tuesday, saying the recent share trading frenzy in the United States had highlighted the dangers of a lack of regulation.
From October, retail investors who wish to buy complex investment products such as structured products, repurchase agreements or marginal trading on Russian stock and foreign currency markets will need to pass a test with questions about various financial instruments, said Elena Sherwood, deputy head of consumer protection at the central bank.
Topics covered in the test will include, among others, repo transactions, marginal trading, transactions with financial derivatives, the purchase of structured bonds.
A lack of education about financial markets is one of the reasons why retail investors buy stocks at an already high level and then suffer substantial losses, the central bank said.
A recent trading frenzy by retail investors on online forums such as Reddit’s WallStreetBets in the United States sent some stocks to meteoric gains and fuelled a copycat trading boom in Europe, raising concerns among regulators including in Russia.
“Such situations when a large number of retail investors are involved are a dangerous practice for the financial market as they undermine trust in it and turn market trading into gambling,” the bank said in its statement.
Central bank Governor Elvira Nabiullina said last week that the bank was looking into the Reddit case.
The bank said it has almost finalised standards for brokerages to test millions of their retail clients from October who want to buy a complex financial market product, Sherwood said.
“A person who takes the (planned) tests will be able to – and we welcome this – use internet sources, read articles, find the right answers. All this will form this person’s knowledge of the financial market,” Sherwood told a conference.
The central bank has for years considered limiting access to trading for amateur investors. Last year it recommended restricting retail investors’ access to buying complex financial-market products that may incur vast losses, such as marginal trading and structured products.
A record-high number of amateur investors turned to trading last year amid coronavirus lockdowns and record low interest rates. The Moscow Exchange alone registered an influx of over 9 million new clients in 2020. (Reporting by Elena Fabrichnaya, writing by Anna Rzhevkina, editing by Andrey Ostroukh and Susan Fenton)