FROM RUSSIA WITH LOVE

How BCS Transformed from a Regional

Player to an Emerging Markets Leader

2 From Russia With Love

A n ocean away from New York and nearly 4,000 miles east of London, broker-dealer and investment bank BCS Financial Group is a 24-year veteran of the Russian financialservices industry. Now the firm is making efforts to ramp up in the world’s biggest fi-nancial centers, and the early returns have been nothing short of remarkable.

“In 2016, BCS Global Markets launched BCS Americas to give stateside investors unparalleled access to the Russian mar-kets, and importantly vice-versa,” said Gary Esayian, CEO of BCS Americas, a division of BCS Global Markets. “Given our strong results in Moscow and Lon-don, our senior management team felt very confident and became determined to take the step into the U.S. I think it is safe to say we are largely meeting our internal expectations. Although people are cautious, Russia remains a power-ful draw for outside investors, especially from the Americas. Notwithstanding the geopolitical environment, our business has become truly global, and that is how

we think, plan and execute. Everyone on our Americas team has a very strong background in the U.S. and international markets, whether that be Equities, Fixed Income, Syndicate or DCM/ECM. These attributes – expertise and versatility – are key to our rollout strategy.”

Last year, BCS Americas became a member of the New York Stock Exchange as a trading floor broker after hiring Jef-feries’ former floor brokers, Steven Capo and Chris Morie. Esayian refers to this milestone as “a statement of commitment to the U.S. and recognition that NYSE is overlooked from a microstructure per-spective, as well as a nice tie-in with our memberships on the Moscow Exchange,

FROM RUSSIA WITH LOVE

BY JOHN D’ANTONA JR. | TRADERS MAGAZINE ONLINE NEWS, MARCH 12, 2019

How BCS Transformed from a Regional Player to an Emerging Markets Leader

‘‘ I think it is safe to say we are largely meetingour internal expectations. Although people are cautious, Russia remains a powerful draw for outside investors, especially from the Americas. ’’

– Gary Esayian, CEO of BCS Americas

From Russia With Love 3

the LSE and Euronext.”  In addition, BCS Americas recently announced the launch of its new global equity trading platform, which allows investors access to robust suites of algorithmic trading tools with a comprehensive global market reach. This is BCS’ latest investment in helping its cli-ents reach the U.S. equity markets on equal footing with the largest domestic players.

“We see clients trading the U.S. mar-kets that many brokers would never see. It’s solid volume and we deliver it at competitive rates and, crucially, with quality execution by any measure,” Esay-ian added.

The numbers speak for themselves. BCS now handles a quarter of all equity volume in its home market, which has had knock-on effects. It has also become the premier source of liquidity in de-rivative instruments – BCS is a signifi-cant player in most Russian ADRs, led by Michael DeNardo, who joined from Convergex’s London emerging markets desk and runs the U.S. trading desk, and Christian Mitchell, formerly of Deustche Bank, who runs programs as well as BCS’ special area of expertise, pairs trading.

“The story of BCS is one of tremen-dous, continuous growth,” said Bradley Duke, MD, Head of International GMIB and Co-CEO of BCS UK. “We’ve gone

from regional dominance to worldwide recognition, and our continued invest-ments in talent and technology have us well-positioned to continue that story in the years ahead.”

FROM HUMBLE BEGINNINGSBefore venturing into the wider world of financial services, BCS cut its teeth as a big fish in a small pond. Oxymoronical-ly, that small pond was Russia, which, although the world’s largest country by area and ninth-largest by population, does not have one of the world’s top 20 stock exchanges by market cap within its borders, although its MOEX exchange is growing quickly.

Established in 1995 by Oleg Mikhasen-ko, BCS initially focused on retail broker-ing, but Russia’s rising middle class led to a sharp increase in those looking to play the markets, allowing the firm to begin build-ing out its brokerage services in the mid-2000’s. At the time, government-affiliated giants like Sberbank and VTB dominated the space, but as the U.S. and the EU be-gan placing sanctions on firms with ties to the Kremlin, the independent BCS filled a huge gap in the market as its competitors suffered with their foreign client business curtailed due to the restrictions.

By 2013, BCS was trading more equi-ties and derivatives than anyone else on the Moscow Exchange; it also launched Russia’s first dark pool. In that same year, it moved its emerging market headquar-ters from Cyprus to London and began a hiring spree that would last for 18 months, building out its international brokerage business. Throughout that period and ever since, BCS has worked at a frenzied pace, unveiling new offerings, enhancing old ones and infiltrating new markets.

CONNECTING THE WORLDOf course, providing international inves-tors with access to the Russian markets comes with its own set of unique chal-lenges. Humans have a fundamental fear of the unknown that tends to heighten when millions of dollars are on the line, and for years, trading Russian assets meant opening a Russian depository ac-count using rubles.

That situation is rapidly evolving, as BCS provides in-country real-time FX hedging, clearing, stock loan, repo and all the traditional elements of set-tlement. The firm has reached new heights with the launch of its  synthetic prime brokerage product, announced by the firm last November. By effectively

4 From Russia With Love

BCS GLOBAL MARKETS1270 Ave of the Americas New York, NY 10020 | 212.421.8534 | Gary.Esayian@bcsgm.com

doing trades as swaps rather than straight transactions, BCS allows clients to trade Russian assets in native quot-ed currencies as well as in U.S. dollars, allaying one of the most prevalent con-cerns investors have about venturing outside the largest financial hubs.

In addition to building out its own suite of products, BCS has advanced its U.S. capital markets agenda by making an investment in Tigress Financial Partners LLC, a New York-based broker-dealer that happens to be one of the larger wom-en-owned entities in the space. It has brought on Ros Orach, an experienced emerging markets fixed income sales trader, to lead its Fixed Income sales ef-fort in the Americas, and the results have far exceeded expectations. BCS’ Russia DCM and ECM businesses are expand-ing beyond Ruble-denominated issuanc-es to those in Euros and U.S. dollars, po-sitioning the firm for additional revenues from those lines of business in the second half of 2019.

“Our size gives us flexibility and the abil-ity to react to unique setups,” said Esayian. That includes working in tandem with another global bank to seed a Chinese-fo-cused ETF UCIT from Dublin, managed in New York and listed on the LSE. “That’s China, Ireland, the U.K. and the US, with a Russian-founded broker, all in partnership to bring a high-quality investment to the public markets. That’s very cool.”

“BCS’ commitment to best execution and superior client service were evident from the very beginning of our relation-ship,” said Mark Schlarbaum, Managing Partner and Head of Capital Markets at KraneShares, a $2.2 billion asset manag-er that trades mostly Chinese ADRs and Hong Kong locals. “In addition to exe-cution, they have been very supportive to launch of our UCIT listing in London for KWEB.LN (Krane Shares CSI Chi-na Internet). Going forward, we fully expect BCS to continue helping us pro-vide superior return on investment for our clients. Like many firms, we have long been intrigued at the prospect of

bringing what we do to Russia, and BCS’ unique position in those markets could be a game changer in that regard.”

SKY’S THE LIMITBCS’ unique position makes it a firm to watch in the years ahead. In addition to Russia, the emerging markets in which BCS excels – specifically the so-called “CIS” nations, which are the alliance of former Soviet republics (i.e., Kazakhstan), as well as Israel and South Africa – have proven hugely appealing to investors glob-ally, and BCS has positioned itself as the ultimate access point to them.

Esayian, for his part, believes the best is yet to come.

“We’ve been working nonstop the past 18 months here in New York to make our business truly global, not just in words, but in practice. Between new products and partnerships, we’ve seen amazing progress in the last six months alone,” he said. “Still, many investors remain un-aware of the opportunities that lie in Rus-sia and beyond. The geopolitical head-lines are unavoidable, but I like to think our work is critical to capital formation, liquidity and meaningful growth, regard-less of region based. Our shareholders,

worldwide staff, industry partners and most importantly our clients are our con-stituents irrespective of residence. We are a good global citizen and I’d like to think a worthy competitor in this segment of the marketplace.” •

‘‘ The story ofBCS is one of tremendous, continuous growth. We’ve gone from regional dominance to worldwide recognition, and our continued investments in talent and technology have us well-positioned to continue that story in the years ahead.’’

– Bradley Duke, MD, Head of International GMIB

and Co-CEO of BCS UK