Broker Credit Service (BCS), a Russian brokerage, is gearing up for an expected influx of electronic trading flow with new hires and services that anticipate Russian market structure reforms.
Sources confirmed that the broker has hired five members of the electronic trading team at rival broker Otkritie, including Tim Bevan, director of electronic trading, Nils Jahn, head of global electronic trading, Luis Saenz, CEO of Otkritie’s New York CEO and sales traders Michael Barmettler and Mark Cleary. Otkritie has confirmed that Mikhail Sukhobok, one of the firm's founders has now returned to head its global electronic trading division, reporting to CEO Igor Vayn.
The new team will join Stas Surikov, head of prime brokerage and electronic trading, Mike Smith, head of international sales based in London, Rizwan Kayani, COO of the institutional division, and Yulia Yaroslavtseva, head of client relationships, all of whom joined from another Russian-owned rival, Renaissance Capital, in August last year.
Declining to comment on the new hires, Surikov told theTRADEnews.com that the firm was continuing to build up its agency execution offering and capitalise on the liberalisation of Russian market infrastructure.
The firm is hoping to have its DMA and low-touch trading tools ready by mid-July and is also working towards launching an internal dark pool that will leverage its retail liquidity and a stock locate tool in 2013. The stock locate tool will enable the easier pre-funding of stock trades, which is currently required under Russia’s T+0 settlement regime.
“There are a limited number of local firms with the expertise to offer low-touch services in Russia, which gives us a chance to get a foothold in the market before the increase in liquidity that will happen due to the reform of market structure,” said Surikov
As well as the continued integration of Russia’s two exchanges MICEX and RTS, which completed a merger in September 2011, Surikov noted higher levels of foreign investment will be driven by changes to the country’s clearing house that enable US funds to trading Russia, a move to T+3 settlement – from T+0 currently – and revisions to tax laws.
Although Surikov labels these changes as a “huge step forward” for Russian markets, he does not expect much interest from global banks and other firms that want to offer low-touch execution services until the reforms have bedded in.
"There are a number of global banks who currently offer high-touch execution in Russia and all of them were looking to extend their offering with low-touch services," said Surikov. "But given the complexity of the market infrastructure and costs associated with such a project, those services have not yet been built. Forthcoming changes may actually slow down this process further and cause global firms to temporarily step back and wait until the situation stabilises. In the short term, especially if the changes are not properly managed, we may actually see liquidity decrease on the domestic market before surging in the medium- to long-term."
Global banks will also be wary of Russian market stability following a glitch on 23 April that led to MICEX closing almost two hours early. The market reopened at around 21.50 to allow traders to close out positions, but local news reports suggest that the exchange initially contributed to the confusion with conflicting statements about the resumption of the trading. Following the incident, MICEX said the outage resulted from the “simultaneous failure of the software and the hardware that provide redundancy for the trading system”, and that a working group had been set up to prevent a similar incident from reoccurring.
Prior to developing its institutional trading offering BCS primarily served domestic retail clients, offering direct market access and brokerage services for Russian markets and access to major international markets via global brokers.
Otkritie's Sukhobok left the firm 12 months ago to help manage the merger between RTS and MICEX. As well as leading the firm's electronic trading efforts and overseeing clients' exchange relationships, he will serve as a member of Otkritie's management committee.