TMX Atrium sees opportunities for high frequency trading in Russia

In the second of a two-part series on high frequency trading (HFT) development in Russia, Modern Russia spoke with Emmanuel Carjat, Managing Director of TMX Atrium, a leading global HFT infrastructure provider that recently announced plans to expand into Russia. 

You recently announced plans to expand your network to Russia. Why are you entering the market now?

The main driver for TMX Atrium‘s expansion to Russia is the increasing presence of Russian companies like Polymetal on the London Stock Exchange (LSE).  A number of the securities traded on MICEX-RTS are also traded on the LSE’s International Order Book in GDR or ADR form.  In fact, the top ten securities on this market are all Russian.  TMX Atrium provides the fastest possible connectivity for information flows across venues and gives financial services’ participants connectivity to trade Russian securities and a competitive advantage when trading on global capital markets.  

What is the demand outlook for HFT in Russia? 

High frequency trading is dependent on good liquidity, execution certainty (low latency) and an appropriate execution venue pricing model delivered within the right regulatory framework.  As the Russian markets grow, deeper liquidity will develop that will help reduce the cost of trading.  If the Russian markets follow the same trajectory as the European and North American markets we will witness an increase in HFT trading.  A move to a more standard settlement time of T+3, expected towards the end of 2012, will also aid high frequency trading in Russia.

What are the geographical centers of HFT in Russia? Does much trading occur outside of Moscow?

HFT traders need to be located in or as close as possible to trading data centers, most of which are in Moscow.   While there may be liquidity in other Russian centers, HFT activity is unlikely.  The closer a participant is to a liquidity center the quicker they can receive and react to the information provided.   

What are some of the challenges associated with HFT development in Russia? 

The provision of deep liquidity in a large and varied pool of securities is a key starting block.  A correct and appropriate market model, low cost of trading, low latency access and a benign regulatory framework will also aid HFT development in Russia.  Underpinning this is a need for robust infrastructure to ensure the timely receipt of market data and order execution.

Has the MICEX-RTS merger impacted the trading environment in Russia? 

The formation of the unified Exchange MICEX-RTX has led to the creation of a larger liquidity pool, which acts as a powerful hub and natural draw for HFT trading across multiple asset classes. 

Has access to the Russian trading community increased in the past several years? If so, why?

Yes. Due to the opening up and expansion of the Russian markets, ‘local’ Russian brokers such as Otkritie, Troika, Renaissance Capital and others, have set up operations outside of Russia.  This increase in market size has boosted capital flow both into and out of Russia as local brokers tend to have the best access and knowledge of Russian markets. Well-known western brokerage houses are also establishing a Moscow presence to provide DMA (direct market access) to Russian markets.

How much technological progress has Moscow made towards becoming a global financial center? 

Russian nationals have been at the vanguard of electronic trading for the past 20 years in North America and Western Europe. Increasing numbers are now returning home and taking valuable technology and expertise back into the Russian market, which will lead to further development and investment.

How would you compare the HFT environment in Russia to that of other capital markets? 

Cross-asset class trading, particularly FX trading, presents opportunities for HFT in Russia.  HFT traders require multiple streams of market data to analyze and set their trading strategies and positive developments such as the creation of a unified exchange create additional liquidity that benefit HFT activity in the long-run.  The Russian markets are still in a nascent stage for price discovery and securities are beginning to grow in liquidity depth. However, looking at the development of the equity markets in Europe and North America we anticipate that the demand for access to the Russian market will increase in the coming years.  

How has Russia’s HFT network improved to address the challenges of trading across long distances? 

TMX Atrium is seeing more sophisticated approaches and strategies being developed inside and outside Russia, including low latency access to multiple markets. TMX Atrium is consequently investing in Russia to aid this development and support our international customer base.

Can you comment on network security in Russia, what are the key issues and potential challenges? 

Like all critical infrastructures the reliability and availability of the network is vital to the delivery of data used by HFT traders. TMX Atrium is developing a platform in partnership with local trading participants scaled for access to HFTs in Russia.  

Emmanuel Carjat is the co-founder and managing director of TMX Atrium, a rapidly expanding financial services infrastructure community across North America and Europe.