BCS Launches Prime Platform for Russian Capital Markets

Potential further sanctions against Russia could be just around the corner, further lowering capital market demand.

BCS Global Markets, the largest independent securities broker on the Moscow Exchange (MOEX), announced this Monday that it has launched a new trading product which will give professional and institutional investors easier access to Russia’s capital markets.

Russia is a complicated market on a regulatory, settlement and hedging perspective for institutions located outside of the country. The new synthetic prime platform aims to reduce the complications by, for the first time, allowing firms without dedicated Russian access a way into the country’s capital markets.

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The platform is particularly targeted towards institutional and professional investors in countries such as the United States, as US-based institutions are unable to trade MOEX-listed derivatives. This is because the market is not recognized by the Commodity Futures Trading Commission (CFTC).

Specifically, the synthetic prime brokerage offering can be denominated in the US dollar. This means institutions don’t need local settlement arrangements or Russian ruble accounts to access the instruments. In the future, the broker aims for the synthetic prime product to become a multi-asset platform.

BCS is a market leader for Russian equities and foreign exchange (forex). Earlier this year, the company was the first Russian brokerage to become a registered member of the New York Stock Exchange (NYSE).

Tim Bevan, CEO of BCS Prime
Tim Bevan
Source: LinkedIn

Commenting on the product launch, Tim Bevan, Global Head of Prime BCS Global Markets and Co-CEO BCS UK said: “We believe that the Synthetic Prime offering can become a major international business. We’re already seeing a lot of demand from small and medium sized hedge funds who are underserved by larger international prime brokerages – we’re confident that this is a highly scalable model.”

Russia Could Face Further Sanctions

While BCS states that it already sees a lot of demand for its product, in general, outside demand for access to Russia’s capital market is low. This is in large part due to the difficulty for firms located in countries outside of Russia to gain access. However, Russia could be looking to face further sanctions, which will only further weaker demand.

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These sanctions refer to the news that came out overnight from Ukraine that three of its boats were attacked, fired on and seized by the Russian military as they attempted to access Ukrainian-controlled ports in the Azov Sea.

Russia, however, disputes this description of events, insisting that the Ukrainian vessels had taken a route to provoke the Russian army and have encroached on its maritime territory. This incident follows months of tension brewing between the two nations.

Now, Ukraine’s parliament is calling for the European Union (EU) to impose further sanctions on Russia, with Ukraine’s envoy to the European Union, Mykola Tochytskyi calling for action on Twitter.

If further sanctions are to be imposed on Russia by the EU, this could hamper the success and demand for BCS Global Markets’ product. However, only time will tell.

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