High-Frequency Traders To Descend On Eastern Europe

Terry Flanagan

Banks and brokerages are continuing in their quest to open up access to the main emerging markets of central and eastern Europe and its near neighbors—as traders eye the riches of their fast-growing economies.

Bulge bracket bank Citigroup is the latest to offer direct market access to the Turkish equities markets, with its offering of algorithmic trading products to customers trading electronically on the Istanbul Stock Exchange (ISE) via Citi Menkul, the local brokerage Citi bought in 2007.

“We’ve combined our comprehensive suite of algorithmic strategies with an unrivaled level of local knowledge and service to help our clients succeed in this exciting market,” said Tim Wildenberg, Citi’s head of electronic trading for EMEA. Citi rolled out a similar offering in Israel late last year.

Turkey, which is a candidate for European Union membership, although these negotiations are moving along slowly for the Middle Eastern country, is currently in the process of reforming its capital markets infrastructure and is merging its two main exchanges, ISE and TurkDex, the Izmir-based derivatives exchange, in a bid to develop Istanbul as a regional financial hub.

The ISE has already signed an agreement with Deutsche Börse, the German exchange, to co-operate on product development in a bid to develop closer ties with Frankfurt and boost its international presence.

Other financial firms have also been turning their attention to the burgeoning Turkish market. CA Cheuvreux, the French agency brokerage, began offering its own algorithmic trading products on ISE in late 2010, while Russian-based investment bank Renaissance Capital acquired Istanbul-based brokerage Mira Securities in December last year.

Meanwhile, ISE’s two main emerging market rivals in the region, the Warsaw Stock Exchange (WSE) and Moscow Exchange, have also been busy recently attempting to open up to electronic traders in a play to boost liquidity.

WSE has also signed a co-operation agreement, this time with NYSE Euronext, operator of the New York Stock Exchange and various European venues, and is currently overhauling its trading infrastructure as the Polish bourse plans to facilitate easier access for foreign investors, including high-frequency traders.

One Polish broker, CDM Pekao, part of the UniCredit Group, is to use trading and technology firm SunGard’s Valdi workstations, trading tools and gateways for direct market access trading on to the WSE.

“Many Polish brokers are re-evaluating their technology infrastructures as the move to the Warsaw Stock Exchange’s new trading platform gets closer,” said Philippe Carré, global head of client connectivity for SunGard’s capital markets business.

“SunGard is helping customers like CDM Pekao by providing the functionality, low latency and scalability that they need to migrate to the exchange’s new technology and help expand their business.”

Wojciech Rutkowski, president of the management board at CDM Pekao, added: “SunGard gives us confidence that we can seamlessly migrate our trading business when the WSE introduces the new NYSE Euronext UTP trading engine later this year, as well as helping us fully leverage the engine’s new capabilities.”

The newly rebranded Moscow Exchange, meanwhile, which is the result last December of a $4.5 billion state-backed merger of the two Moscow exchanges, Micex and RTS, also wants to open itself up to more foreign investors, by developing new technology, and is pushing the boat out to attract more high-frequency trading firms.

For instance, Renaissance Capital last month began offering direct market access to its clients to the Moscow Exchange through its high-frequency trading software module, powered by GATElab, an electronic trading systems provider.

“Renaissance Capital is pioneering the ultra low latency/high frequency trading connectivity field [on the Moscow Exchange],” said Stefano Falciani, managing director at GATElab.

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