The rise of proprietary trading (prop trading) in
Russia has caught the attention of the country’s central bank, but not for the
reasons traders might hope.
While prop trading firms have gained traction both
domestically and internationally, the Bank of Russia now views their operations
as a potential threat to market stability, raising concerns about manipulation,
according to the central bank’s 2024 annual report to State Duma.
Without clear regulations governing their activities,
these firms operate in a legal gray area—one the regulator may soon seek to
address. In the report, the Bank of Russia highlighted its efforts to combat
unfair trading practices.
Russia’s Central Bank Flags Market Risks
‘The first months of 2025 suggest that the economy is
gradually restoring this balance. Price growth is decelerating, while the
economy is still growing, although at a more moderate pace,” Elvira Nabiullina,
The Governor of the Central Bank of Russia, said.
“In other words, production capacities continue to
expand, while the increase in demand is becoming more balanced, without
provoking a further acceleration of inflation and depreciation of the ruble.”
It identified prop trading as a growing concern, not
due to consumer protection issues, but because of its potential impact on
market integrity. According to the report, prop trading firms account for a
significant share of securities and derivatives trading.
The regulator believes their reliance on repetitive
trading strategies, high-frequency transactions, and large trade volumes could
distort organized market parameters.
It emphasized that these firms’ influence extends beyond individual transactions, affecting market trends as a whole. One
of the core issues raised by the regulator is the lack of legal provisions
specifically governing prop trading firms.
First Findings of Market Manipulation
The current legislation does not impose internal
control requirements on these firms, creating regulatory blind spots that could
facilitate unfair practices.
The central bank’s concerns are not just theoretical.
Following inspections, authorities uncovered instances of market manipulation
involving futures contracts and shares traded on organized exchanges. While the
regulator has taken action in these cases, the broader structural risks remain
unaddressed.
In response, the Bank of Russia has urged prop trading
firms to strengthen internal controls over individuals managing their
operations, including those developing trading strategies. The regulator also wants these measures, along with
proper training, could help prevent violations of financial market laws.
Expect ongoing updates as this story evolves.
The rise of proprietary trading (prop trading) in
Russia has caught the attention of the country’s central bank, but not for the
reasons traders might hope.
While prop trading firms have gained traction both
domestically and internationally, the Bank of Russia now views their operations
as a potential threat to market stability, raising concerns about manipulation,
according to the central bank’s 2024 annual report to State Duma.
Without clear regulations governing their activities,
these firms operate in a legal gray area—one the regulator may soon seek to
address. In the report, the Bank of Russia highlighted its efforts to combat
unfair trading practices.
Russia’s Central Bank Flags Market Risks
‘The first months of 2025 suggest that the economy is
gradually restoring this balance. Price growth is decelerating, while the
economy is still growing, although at a more moderate pace,” Elvira Nabiullina,
The Governor of the Central Bank of Russia, said.
“In other words, production capacities continue to
expand, while the increase in demand is becoming more balanced, without
provoking a further acceleration of inflation and depreciation of the ruble.”
It identified prop trading as a growing concern, not
due to consumer protection issues, but because of its potential impact on
market integrity. According to the report, prop trading firms account for a
significant share of securities and derivatives trading.
The regulator believes their reliance on repetitive
trading strategies, high-frequency transactions, and large trade volumes could
distort organized market parameters.
It emphasized that these firms’ influence extends beyond individual transactions, affecting market trends as a whole. One
of the core issues raised by the regulator is the lack of legal provisions
specifically governing prop trading firms.
First Findings of Market Manipulation
The current legislation does not impose internal
control requirements on these firms, creating regulatory blind spots that could
facilitate unfair practices.
The central bank’s concerns are not just theoretical.
Following inspections, authorities uncovered instances of market manipulation
involving futures contracts and shares traded on organized exchanges. While the
regulator has taken action in these cases, the broader structural risks remain
unaddressed.
In response, the Bank of Russia has urged prop trading
firms to strengthen internal controls over individuals managing their
operations, including those developing trading strategies. The regulator also wants these measures, along with
proper training, could help prevent violations of financial market laws.
Expect ongoing updates as this story evolves.
This post is originally published on FINANCEMAGNATES.
