GC Friday Interview: Tim Bevan, CEO of BCS Prime Brokerage, on the European Market

Western sanctions on Russia, coupled with stricter rules on clearing and collateral, is having a significant effect on Russian brokers and their European subsidiaries says Tim Bevan, CEO of BCS Prime Brokerage. Bevan shares his views on the current European regulatory environment, and where he sees opportunities in the prime brokerage space.
By Joe Parsons(2147488729)
European markets have reacted incredibly volatile to the events with Russia in the Ukraine. The subsequent actions of Russia have resulted in Western leaders placing sanctions on the country, which has restricted Russia’s major state banks and corporations. As a result, scares in natural gas and oil supplies have caused volatile price swings in commodities. But how have Russia’s independent brokers and their subsidiaries been affected? BCS Financial Group is the largest trader on the Moscow Stock Exchange. Its U.K. entity, BCS Prime Brokerage, offers brokerage services in a range of securities and derivatives market. However it too has felt the sting of U.S.-E.U. sanctions. Tim Bevan, the new CEO of BCS Prime Brokerage, speaks to Global Custodian about the challenges his company is facing, and the wider regulatory environment. But he also sees opportunities in the prime brokerage space where many wholsesale banks seem to be retreating from servicing smaller firms.

GC: Going into the role, is there anything that surprised you?

TB: I have been a director of the UK business since the beginning of the year so nothing has surprised me, though the role is certainly different. However it is a challenging environment for a Russian-focused broker given the current geopolitical situation. There are plenty of people out there wanting to trade in Russian assets, but it is not exactly an easy sell for those people that haven’t traded in that market before. We are still a relatively young company and building out our infrastructure. In a European market that is changing quite rapidly, it is also has been challenging.

GC: Is BCS facing difficulties more so than other EU firms in the brokerage business?

TB: It has been challenging to build out as rapidly as we wanted, both on the client acquisition side and in terms of finding the right partners to do it with. I think much is related to the changing European environment; less and less people are offering GCM services, banks do not find it as attractive to be risk carriers due to increasing regulation, so it is difficult to build out.

GC: How is BCS handling the additional costs for central clearing?

TB: I think the costs are going up across the board for everyone because balance sheet is becoming more expensive. Everyone is feeling a certain level of cost pressure, and this is not helped with less providers being in the space. So from our perspective the key has been to not rely on single providers but to have multiple providers in the space. Everyone wants to see more diversity in some services, ourselves included, because there can’t be a one-size-fits-all model. When looking at your clearing and custodial relationships, you have to make sure you have diversity in terms of managing operational risk. However with that complexity it does come with a certain level of cost.

GC: What is your regulatory outlook for 2015 and what markets are you interested in?

TB: We still feel there are many opportunities in the European market. If you look at the prime brokerage space, the wholesale banks seem to be retreating further and further away from the small to medium-sized hedge funds, the benchmark requirements for assets under management seem to be increasing almost monthly at the moment. So we do feel there is definitely a market there in terms of servicing and financing, and also the core Russian business is growing well as our reputation grows on the street.