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Russians to trade foreign stocks soon?

Russians may soon be allowed to trade shares of foreign companies on the local market. The financial markets watchdog has sent a draft law to the Russian Parliament. If passed, the new law would have far-reaching implications.

Internet sites such as US-based E-Trade allow some Russians to buy and sell foreign securities provided they have a US bank account and are willing to pay capital gains tax both in Russia and in the US.

But that’s about to change. The draft law sent to the Russian Parliament for approval would allow foreign securities to trade on the Russian market, which experts say would be testament of the market’s maturity.

Aleksandr Kotchoubey from Renaissance Capital investment company in Moscow believes “it's positive because the market suffers from high inflation which finally teaches the investors to diversify their portfolios. And after many years of strong gains in the Russian market it's very important they have started thinking of diversification.”

Aleksey Timofeev of the National Association of Stock Market Participants says for now there may not be high demand for foreign securities within Russia. But the higher the liquidity of the market, the more interest it will attract.

“The higher the interest in the Russian market, the more players it will attract. It is already the leader in Eastern Europe, and now it will have a chance to become the main trading platform for companies in the region,” claims he.

If passed the law would bring Russia a step closer to becoming a regional financial centre. But traders say securities from countries like Ukraine and Kazakhstan which could be in high demand are likely to be excluded.

That’s because these countries are not members of the Financial Action Task Force, an international body that combats money laundering.