Pavel Vidov, Head of Trading, Intrast
AT: What asset classes do you trade and where?
Pavel Vidov: Derivatives, equities, depositary receipts (DRs) and now moved into the FX market. It is probably the main market that is profitable here in Russia, at least for HFT trading. We are mainly on the Russian market, but also in London, and Chi-X, but (Chi-X) is pretty small volume.
Our volume on a daily basis across all the instruments is like hundreds of millions of dollars.
AT: How have strategies been affected by the economic situation?
PV: For DRs, the volumes are lower than before, but the arbitrage opportunities are bigger. Everyone who is doing this kind of strategies, like market making or arbitrage, they have more opportunities for profit right now.
The volumes on the IOB in London are like three times lower than before in terms of dollar volumes. The number of stocks traded is not much lower, but since the stocks are much cheaper now than they were before, the volumes have dropped.
But there are bigger opportunities for this kind of trading.
AT: That's because?
PV: There are more statistical deviations from normal behaviour. The price is not so exact as it was before, we see less competition in terms of liquidity provision. Some of the foreign firms exit because of some of the sanctions. The other thing harming price discovery is the rising costs of carry. The central bank has set the interest rate at 17%, so the price of carry in roubles has risen very much. Interest rates and sanctions have also caused problems with conversions of DRs to local shares and vice versa. And sure high volatility is an environment where HFT players feel well.
In December there were problems with liquidity (when) brokers set the margin interest rate at very high levels, so it was pretty difficult to carry the positions overnight. Also, foreign banks that are liquidity providers in terms of DRs, they have stopped or lowered the volumes they do with Russian counterparties, so it is now also more difficult to obtain DRs for short positions. That is why I believe the opportunities for arbitrage are now more interesting than it was before.