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44 I Eastern Europe bne November 2018
25% of MOEX trading turnover. You can have organic growth. You can add new debt. But ultimately you have to build
a platform that can be used in other markets.
In London we saw an opportunity to get into the prime brokerage segment where we are strong. The regulation in Europe became very strict and we saw that funds in the middle range – $50m-$100m –
are underbanked. Larger banks have these capital adequacy restrictions and
we are another Russian broker and offer services that people didn't need. So we tried to identify niches where we can compete, and to hire a good team of people so we can compete.
We created an American broker-dealer that provided niche services that addressed our customer base. We are very strong on execution, which is why we got membership in the NYSE. We can execute on blocks and participate in auctions and offer after market close
long-term. Yes, there will be uncertainty, and yes, there will be turbulence. But are we talking about six months time until things become clearer? Will these investors disappear forever? I don't think so. We have our relations. They still need good research on the CIS and Russia.
Tinkoff bank just returned 1,000% in the last two years. We still have very good midcap companies coming to market.
BA: There is a community in New York that has been investing in Russia and it has been an extremely turbulent ride. But they know full well that when you get the timing right then it can be a very profit- able investment. Now the equities are very cheap because of the problems. Maybe this is a good time to get into the market?
RL: Everything is cheap, this is the broad picture. This is the picture for portfolio mangers, and maybe it is better to wait. But as an investment bank you have to be there, and there are still stories that are less dependent on sanctions. And it is always possible to cherry-pick.
The sentiment on Russia is poor and stocks are down, but at the same time these two companies – shoe retailer Obuv Rossii and logistics company Transglobal – are dependent on the local market. We do roadshows with them every second month and they have fulfilled their invest- ment programmed. I don't see investors that have sold their stock since the IPO last year. Investors believe in the story.
With our brand we have created a Rus- sian investment story. We just had a con- ference in London and despite the fact the markets are closed at the moment and people are waiting, we had a signifi- cant number of people come willing to listen to stories.
BA: You think the market will come back and tensions will ease?
RL: Russia will come back for sure, but it is a question of time. Sanctions won’t disappear quickly but there are still a lot of opportunities.
BA: BCS GM recently tied up with Tigress Partners, which is a woman-owned fund
“We created an American broker-dealer that provided niche services that addressed our customer base”
other issues, and either overcharge these smaller funds or provide a low level of service. This is why we entered this niche.
We invested in a swap engine. We wanted to be innovative because no one in Russia does this sort of thing. We needed to keep our leading position at home so we have to innovate constantly. Some of these developments will come to Russia first eventually so why not be first?
BA: Are you using your platform to enter on the Russian business that you do, but then use the relationships with custom- ers in the US and UK to build and offer non-Russian services by building on the relations that you already have?
RL: In Europe this was exactly the case. In America it was exactly the opposite. We started working on that market
and as geopolitical [tension] picked up the Russian banks started to leave the market. There are just two government owned banks – VTB and Sberbank – who were left on the market.
I believe there is no Russian bank that was extremely successful in the US. Everyone who worked on the US market came with very standard services. They offered buying stocks or bonds and that was pretty much it.
Several years ago I felt it was not pos- sible to come to New York and say that
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trading, not just on Russian stocks but on everything. Then we invested in a desk trading distressed equities – Chap- ter 11 etc – not a lot of guys are doing
it but it was another place were we can attract customers.
Last week we closed a transaction where we provided a subordinated loan to a US minority broker to get access to IPOs and flows so we can provide unique services to Russian customers and those in other countries like Israel. This is important to our customers as normally the US is the second traded market after the local one.
BA: During this MOEX summit the sanc- tions have come up again and again. Is it not a problem to be Russian? People are nervous as dealing with Russians can have political ramifications. Do you suffer from that? Do you feel that? Or is it: the service is the service; the price is the price?
RL: It is not that easy. It all depends on the niche and the customers. Let's take several services. We are number one in servicing quants funds and high frequen- cy trading. So the more volatility they get the better. Do they have problems there? Not at all.
Long only funds? Do they have issues? Yes, of course. Sanctions are not a good thing and people are waiting to see what will come in two months or half a year. But number one they are here for the