Otkritie Securities
Andrew Gazzard
12 November 2013
Otkritie Securities鈥檚 head of repo, Andrew Gazzard, tells SLT how the Russian firm is working on expanding its fixed income offering
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Otkritie Securities鈥檚 head of repo, Andrew Gazzard, tells SLT how the Russian firm is working on expanding its fixed income offering.
Could you summarise the securities lending division of Otkritie Securities?
There are two sides to our business. We have staff in London that primarily deal with the international business and the international counterparties, and then we have a similar team in Moscow, who deal with our Russian clients, or domestic business.
I would liken our London team to the funding tool, whereas our Russian team are more client-facing. As we are part of a Russian bank, a lot of our client flow comes out of Russia, such as corporates and various other banks that we deal with in Moscow. We can use that from a London position to funnel ourselves into the international market.
We operate in London so that we can be FCA-regulated and UK-licensed鈥攁nd these facts mean that we are treated very differently than a Russian entity might be.
We are very active in fixed income and also in Russian ADR/GDR financing. We also have some US equities and European equities, so it鈥檚 quite a mixed bag. As a bank, we鈥檝e always been predominantly known as an equity house but we are expanding our fixed income business currently. We are in the top couple of direct market access (DMA) providers to the Russian markets, and then obviously we have equity sales trading in London.
How long have you been actively pushing the fixed income side of the business?
We started it quite a few years ago and after a two-year hiatus, we are now starting to expand the business again.
We went back to our core products, stabilised everything, and moved forward again.
The Sberbank and Troika merger (completed in January 2012) resulted in our adding a few new staff, and currently we have a team in Moscow of over 10 traders. This is a lot more than there were originally, and Konstantin Tserazov, the head of FICC, is leading the development and expansion.
More recently, Otkritie Financial Corporation took over Nomos Bank (completed in July 2013), one of Russia鈥檚 most profitable and rapidly growing privately-owned banks.
Nomos were predominantly known as a fixed income house too, so we have a great deal more talent in that designation. It has pushed the product suite of fixed income instruments along quite nicely, and has also given us access into a lot of further corporate clients in Moscow that we didn鈥檛 have access to before.
What was your experience prior to Otkritie?
I started off working in various back offices, and resulted in my first role at Swiss Bank. I then got involved in securities lending and gilt repo, and then from gilt repo into an agency lending setup, and then into emerging markets. I鈥檝e been based in emerging markets ever since.
I have been around long enough to see the effects of various defaults over the years. The first that I saw was when I was working at Swiss Bank (now UBS), when Russia defaulted in 1998. It was horrific. One day you were dealing with a bank, and then you would ring that bank and no-one was there.
It took many weeks to resolve. From there I moved to Standard Bank in London, which at the time was a very minor subsidiary of a very big South African bank. Emerging markets were their business.
I was also around for the Argentina default, in 2001. I was in Argentina 3 months prior to the default, meeting all of the banks鈥攁nd you could see the negativity of the locals. Typically they are very bullish about the currency and the country, but when even they were saying that the situation wouldn鈥檛 end well, we went back and put on specific trades to tailor for that outcome. It worked out well for us, and was a very profitable year.
I was at Depfa Bank when the Lehman Brothers default happened. This brought about many issues regarding our liquidity and that of many other banks and financial institutions, which eventually led to the nationalisation of Depfa. From there, I came to Otkritie Securities.
How do you see Otkritie as being unique in this marketplace?
There are obviously a great deal of Russian banks, but after our merger with Nomos, we have elevated ourselves to being the second largest privately-owned bank in Russia (behind Alfa-Bank).
However, Alfa-Bank still has one majority shareholder, whereas we don鈥檛 have any major shareholders that own more than 25 percent of the firm. We are more independent-looking for a privately-owned bank. We鈥檙e also still small and agile enough to get things done鈥擨 can get access into senior management very quickly to get approvals for things, and this has been key in some of the trades that we鈥檝e done鈥攁nd I also feel that relationships are a major part of our business.
We are very keen on building a lot of contacts across many different banks and working together to do as much business as we can.
Ultimately, we have a very good core client business in Russia that is constantly expanding, though it is tougher in Russia because the state-owned banks will always get a certain amount of business.
We have expanded trade-wise and book-wise this year quite significantly, and I hope for us to do similarly well next year, depending on the market. I am very confident that Otkritie will continue to grow and develop into one of the largest financial institutions in Russia.
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