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. Last Updated: 07/27/2016

New Licensing Requirements Expected to Improve Market

New licensing requirements imposed on stock market participants were described Wednesday by the Federal Securities Commission as the best way to drive small, low-capital players quickly from the market.


Experts agreed that the move, which will force many small brokerages and exchanges to miss an Oct. 1 deadline for re-registering, will help bring transparency and reliability to the equities market.


The new rules, effective Aug. 27, significantly increased the net capital reserves required for stock and currency exchanges, reduced requirements for commodities exchanges and left them unchanged for brokerages. But licensing fees rose for all categories.


"It was known in advance that the commission would introduce more stringent requirements to the size of net capital," Alexander Kolesnikov, deputy head of the Federal Securities Commission, told a press conference Wednesday.


"A professional participant has to answer to his clients, but can be responsible only to the extent that funds permit."


Commission officials said the increase in licensing fees corresponded with lengthening license validity. Brokerage licenses now will be extended to three years from one year, and exchange licenses to 10 years from three years.


According to the decree, 80 percent of collected fees will go to the commission and 20 percent to the federal budget.


Ivan Tyryshkin, the commission official who oversaw the changes, said that he understood that the change in rules is tough on exchanges, but that it was the only way to close down the majority of Russia's 54 exchanges, which do not trade at appropriate volumes.


"We don't need dead exchanges anymore," he said.


Denis Derbilov, head of the stock department at the Samara Currency Exchange -- the region's largest -- said the 830 million-ruble ($142,000) license fee for exchanges is too high, but that something needed to be done to improve the market's transparency.