The Bank of Russia has proposed a discussion on two models regarding the operation of exchanges and brokers: maintaining functional differentiation or allowing a combination of functions. The potential consequences, risks, and future regulatory developments are outlined in the Bank of Russia's consultation paper titled "Universalisation or Specialisation? Stock Market Participants’ Roles."
Recent trends have emerged in the Russian stock market. Brokers have been managing clients' securities purchase and sale orders independently without participating in on-exchange trading. Simultaneously, there is an ongoing debate within the professional community about whether certain investor groups should be permitted to conduct transactions in on-exchange trading without intermediaries.
These trends are increasingly blurring the lines between the roles of infrastructure and brokers, affecting market stability, its infrastructure, and financial intermediaries. According to the Bank of Russia, combining these functions might increase costs for brokers and exchanges. Additionally, trading fragmentation across multiple venues would necessitate new approaches to pricing financial instruments.
The analysis suggests that preserving the separation between infrastructures' and brokers' functions is preferable. The Bank of Russia invites discussion on this model's benefits and effects, possible alternatives, and additional requirements for exchanges' and intermediaries' operations.
Market participants are encouraged to submit their comments on the issues discussed in the paper and provide suggestions for developing exchanges' and brokers' regulation by July 31, 2024.