The main owner of the largest Russian brokerage company, BrokerCreditService (BCS), Oleg Mikhasenko, knows very well how to trade shares. BCS turnover increased fourfold last year, reaching 12 trillion rubles. Now Mikhasenko has decided to put his own company's shares up for sale, although only a blocking stake so far. In an interview with Vedomosti, the president of the BCS group of companies told how he is preparing for the deal.

- There are constant rumors about the imminent sale of some investment company. Are you selling BCS?

- We have such plans. We talked about it two years ago. We want to transform the company into a joint-stock company and sell 25% to a strategic investor. Sell not only for the money, but also for new technologies, a well-known brand and a new impetus for development.

- To a foreign bank?

– Russian ones can be good too, but perhaps foreign ones too.

- How much are you worth now, can you tell me?

- BCS has a lot of companies, and we haven't done an assessment recently. This year we'll do a consolidated report according to IFRS and then we'll see. I can say that the assets of the group of companies in 2006 amounted to more than 3 billion rubles.

– And how much do you personally own in the company?

– I have a controlling stake, everything else belongs to the company’s managers.

– Are you already having any negotiations about the sale?

- We have invested a lot in business development recently - and we have no time for that. We created an investment unit for VIP clients, launched an insurance company and a pension fund, bought a bank. Now the group is being consolidated and its development strategy is being written. This year, I believe, we will create a joint-stock company and be ready for negotiations.

– Do you think there are foreign investors who are interested in your business?

- Of course. I think that the entire Russian financial business is interesting now: both retail and large investment business. Foreign investors open representative offices in Russia, buy banks. They sense the country's potential. And we have a profitable business - we are a growing, developing company.

– How do you plan to develop BCS Bank?

- It will be a universal bank that will service both private and corporate clients. We are currently hiring managers, writing a business strategy, have increased the authorized capital, and are planning to develop a branch network.

– Many online brokers are now launching beautiful advertising campaigns and talking about expansion plans. Are you planning something similar? How much money are you spending on development?

- Naturally, we have plans for expansion, launching an advertising campaign and new products, but we do not advertise them. I cannot say that we spend crazy money on developing the brokerage company. BCS is developing on technology, so a lot has to be invested in IT support for customer service and development of software solutions.

– Do you write programs yourself or buy them?

- Unfortunately, there is no ready-made software for brokerage companies, so we actually do everything ourselves. Currently, there are more than 30 people working in the BCS IT department who write software solutions. With banks, by the way, it is easier: there are many good software products for them, which are even interesting to look at.

– Will you spend money on developing the bank and insurance company?

- You don't need a lot of money for an insurance company. It is developing on the basis of our branches. The situation with the bank is completely different: at the end of last year, the bank's authorized capital was already increased to 220 million rubles, and during 2007, it is planned to increase the bank's authorized capital to 1 billion rubles. Financial injections are necessary for the bank's development - to create a branch network, banking products.

– Are you planning to buy anything else?

- No. We have already bought everything we wanted. Now the task is to develop the business. True, we have also launched a company - a customer service that selects and analyzes projects for investment in real estate.

- What's the point?

- We created the management company "BCS - Real Estate Funds" and realized that a customer service is needed, i.e. a company that would monitor the construction. The management company will interact with it.

– How unique are Russian Internet brokers on a global scale?

- Not unique. Internet trading is very well developed in America and Europe. There are no differences, by and large, they just have many more clients. But in terms of service and provision of services, BCS is in no way inferior to Western Internet brokers.

– Why don’t they go to Russia then?

- Sooner or later, most of the world's investment companies will be in Russia. The flow began with insurance companies and banks, new names are constantly appearing, companies of the most diverse financial services are appearing. This is a question of the not so distant future.

– Are there simply too few clients in Russia?

- The client base is constantly growing. But everything depends on the economic state of the country and the level of salaries. If the economy grows, there will be a million clients.

– How many active clients do you have?

- About 30% are those who make transactions on the market at least once a month. This is standard on the market.

– Ill-wishers say that online brokers have very low commission income?

- This is not true. In 2005, the income from brokerage commissions was 224 million rubles, in 2006 - 450 million rubles. I think that for brokers in the top ten, this area is profitable.

- Another common opinion is that the main income of Internet users is marginal lending, which is used by most clients. Is this true?

– About 50% of clients use margin trading. It’s good that the rules were changed this year, making them more liberal. Previously, the leverage was 1 to 1, many clients were unhappy. After the adoption of new rules, when the leverage of 1 to 3 was allowed, for 90% of clients it became enough. Probably, some brokers still give 1 to 10, but this is the lot of a few. The algorithm of actions when accounting for margin transactions has become clearer to us. If we talk about income from providing margin loans, they are not as big as many people think.

– And what interest rate do clients pay on these loans?

– The interest rate for using margin loans is not net profit, the broker also attracts money and bears expenses. The rate on the interbank market is constantly floating, there are periods, for example, when companies pay VAT, banks do not have enough liquidity. As for specific interest rates, they depend on tariff plans and their size can be found on our website. In any case, the margin is not that big.

– Did you like the emergence of the concept of “qualified investor”?

- Yes, definitely. We have been working on the London Stock Exchange for two years now, and the rules there are very similar. True, investors there have the opportunity to independently determine which category to classify them as. They sign a document declaring that they have sufficient experience and understanding of the risks to be classified as a “qualified” or, as they call it in Europe, a “professional investor.”

– The Federal Financial Markets Service believes that all marginal clients should move to the futures market. Will that be the case?

- In my opinion, it is unlikely to happen. Margin trading and the futures market are developing in parallel. The futures market cannot develop without the spot market. Of course, someday the futures market will be larger than the spot market. In America, for example, it is five times larger. But this requires several conditions, first and foremost - liquidity. As the May example showed, we are not doing well with this - then, during the fall, investors ran away and nothing could be bought or sold. Both markets have their pros and cons. And the more experienced the client, the more he strives to use the advantages of all markets.

- You started your business in Novosibirsk. How much more profitable is it to keep people outside of Moscow?

- Of course, it is more profitable - at least twice as much, but the difference in salaries of qualified personnel is decreasing. It is difficult to find the required number of professionals in the regions - there are not so many of them. Now banks have also gone to the regions - they are also buying up qualified people. And there are few people willing to leave Moscow.

– Is it possible to arrange for a financial company, which mainly operates via the Internet, to have its head office in Novosibirsk?

- If we talk about the Internet brokerage direction, then we have it this way: the back office and accounting are located in Novosibirsk. Front offices operate in the branches, which support clients. In Moscow, the entire group of companies operates fully: 160 professional employees - this is an investment company, and a management company, and an insurance company, and a special depository "MSD", and a training center, and a representative office of "BCS Consulting". In total, BCS has more than 600 employees.

– Are people who try to trade themselves behaving wisely? Maybe most of them should invest their money in mutual funds?

- It all depends on the investor's level of training. If he understands why stocks rise or fall, has his own investment strategy, he can work independently. If not, it is better to entrust the funds to a manager or hire an investment consultant. By the way, in our training center we teach clients to trade independently.

– Do many people manage to be successful?

– In a growing market, everyone is successful. Everyone knew that Gazprom would grow – everyone bought and everyone won.

– But surely it happens that the client loses everything?

– It is almost impossible to lose everything. If you work with your own funds, then it is necessary for the shares in your portfolio to depreciate to zero. As for those who work with leverage, according to the law, the broker is obliged to close positions long before there are no assets left in the account.

– Are there many people who want to trade through you in London?

– There are those who want to, and they are already trading on the London Stock Exchange (LSE). The turnover of our clients on the LSE is approximately 5% of the exchange turnover of BCS in Russia.

– How many foreigners work through you?

- There are, but there are not many of them. Western clients are more interested in working through their banks. But we provide the opportunity to simultaneously trade on the MICEX, RTS, New York Stock Exchange, London, Chicago from a single brokerage account in one terminal and we hope that this will attract clients.

– Do you have many clients whose trading assets exceed $1 million?

- Very many. There is a stereotype that mainly individuals with small funds work through online trading systems. In fact, this is far from true. We serve a large number of wealthy investors - individuals, but the number of clients - legal entities is also constantly growing: now they are about 30%. These are management companies, funds, banks, brokerage companies - they invest very significant amounts.

– What happened to your depository license a year ago?

– The Federal Financial Markets Service decided that we had errors in the posting algorithm in depository accounting. We changed our accounting system, and the service returned our license to us.

- You were nominated for the RTS board of directors, but did not get in. Is this connected with the antagonism between traditional brokers and the “Internet guys”?

- It is not connected in any way. There were many people who wanted to get on the council. Probably, those who were elected have more time to work on the council. After all, it requires quite frequent personal presence. There were no intrigues. We have normal relations with other professional participants. We are shareholders of RTS.

– Does Russia need two stock exchanges?

– I think that MICEX should be an exchange with T+0 settlements, with pre-deposit. And RTS – T+3 and without pre-deposit, similar to LSE. Then the exchanges will not compete with each other. It is impossible to make two exchanges with the same trading regime liquid. RTS is the largest exchange market for futures instruments in Russia. The main thing is to maintain and increase liquidity on both platforms, which is what the Russian market currently lacks.

– So you think that RTS will become a futures exchange?

- I think so. Now it is important that RTS exchange technologies keep up with the growing interest in the futures market from investors.

– They say that investors have problems with the speed of the stock exchange’s reaction?

- It happens, turnover grows, the load increases. But the exchange has funds, a professional team. I think they can handle it.

– Do we need a central depository?

- Of course, it is necessary. We have been discussing it for five years already! But it seems like the law is already being adopted. This would increase the attractiveness of our market for foreign investors.

– But, according to the law, there will be two depositories.

- In my opinion, one is needed.

– Foreigners often complain about the inefficiency of Russian infrastructure. Are you satisfied with it?

– Russian investors are quite satisfied with the market infrastructure. Western investors have a number of questions: opening of nominee holder accounts, since depository licenses are not recognized in Russia; absence of a global depository.

INTERVIEW: Oleg Mikhasenko, President of BrokerCreditService