Otkritie Securities London (OSL) the UK-based subsidiary of Russian broker Otkritie, has launched direct market access (DMA) for foreign buy-side firms wishing to invest in Russian stocks via the MICEX exchange.
Under Russian regulation a firm must directly hold the assets it is trading, which makes access for foreign firms a challenge according to Tim Bevan, manager of DMA sales at Otkritie, “In Russia it has always been very difficult to separate execution and custody, because if you do not hold the assets you can't trade them,” he told theTRADEnews.com.
The new service, launched in partnership with custodian bank ING, is intended to avoid entanglements caused by linking directly to brokers operating under the Russian regulatory regime and legal system, or through more complex stock lending arrangements involving a delayed settlement process.
Bevan continues, “This arrangement with ING is the first time you have been able to use an FSA-regulated UK broker – OSL– to trade directly into a third-party custody account with one of the two international custodians most people use in Russia – Citi or ING.”
“International buy-side customers can have the best of both worlds. They can put their assets with a blue-chip custody agency they know and recognise from a credit and risk exposure perspective, and yet still have DMA access via OSL without paying any additional financing or having to borrow stock or any other quirks associated with synthesising a T+ model,” he adds.
Connectivity to the DMA service is afforded via a standard FIX interface and leased line, the more complex part of the offering having been the legal arrangements, “There was a layer of legal complexity which has taken a long time to crack, and we're pleased with the result,” concludes Bevan.