The growth of Russia’s Internet
penetration rate could give a boost to the
fledgling Web-based stock-trading sector,
according to several industry officials. But
insiders say it will be a long time before
the Internet can attract much of the $40
billion to $50 billion of hidden individual
savings in the country.
Currently, Moscow Stock Exchange’s (MSE)
Internet-based operations account for 5
percent (or $300,000 a day) of all
transactions in terms of turnover, an MSE
representative said. Some 39 percent (up
to $77 million a day) of turnover from the
stocks section of the Moscow Interbank
Currency Exchange (MICEX) is through the
Internet, officials said, and MICEX works
with 120 Internet brokers.
One of the major psychological roadblocks to
increased equity trading, experts
say, is the memory of the August 1998
financial crisis, which cost billions of
dollars in savings and investments and just
about destroyed any confidence
individuals might have in financial markets.
But some Internet brokers are nevertheless
preparing for the arrival of individual
investors hoping to establish a presence in
the fledgling sector. New technologies
now allow for reduced commissions, a move
essential for individual investors who
will be playing with small sums. The Internet
systems will also give them the
possibility of managing their accounts
online, monitoring trends and using
adopted analytical programs, experts say.
Igor Moryakov, executive vice president of
Troika-Dialog who is coordinating the
company’s e-troika Internet trading system,
which is set for launch in the next few
weeks said it requires at least
$5,000-$10,000 to play on spec if expecting
profits. Because e-troika is targeting
individuals, it does not collect monthly fees
and does not set a minimum requirement on a
client’s account. Clients pay a
certain percentage generally about 0.25
percent of their monthly turnover in
If a company does not want to work with
smaller individual customers, who are
usually less profitable than larger clients,
it usually demands a minimum sum in the
account and sets a monthly fee, which can
be too costly for individuals.
Anton Karlov, head of equity sales at
Metropol Investment Corp., said his
company works with clients, both private
and corporate, if their portfolio is worth at
least $10,000. “We are now trying to
reduce our costs to be able to attract
clients with smaller sums as well.” He said
that Metropol had been targeting mainly
corporate clients, but the minimum
requirement was reduced from $50,000 a
few months ago.
Another important factor for clients is the
possibility of margin buying, either with
money or securities, and the cost of such
operations. Troika’s system does not offer
any. With other brokers, terms and costs vary
depending on the volume, period
and the type of investment vehicle, such as
put and call options, and futures.
Karlov said different types of investors need
different services. “If the client wants
to play on spec,” he said, “he will first
look at the commission rate and find out
about the possibilities for margin buying.
For a long-term investor, analytical
support and competent management are more
Analysts say that 80 percent of individual
speculators on the market lose their
money during the first two to three months.
But that, they say, isn’t the main
reason holding off other investors from
joining the trading world. Technical and
legislative problems hampering Internet
trading in Russia also prevent them from
joining the fray.
Analysts and insiders cited the poor quality
of telephone cables, via which most
Internet connections are provided, which
means calls and transactions can be
disrupted at any time. For people playing the
markets, that can be a matter of
profit or loss.
If the Internet trader’s own connection
doesn’t get cut, action can come to a halt
if a broker or the provider experience
technical difficulties. That can cut off a
transaction or deprive a trader of crucial
research or analytical data on a specific
equity, also costing big bucks.
Legislative problems come from the fact that
there is no definition of Internet
trading in any law or regulation, industry
insiders complain. No law validates the
use of a digital signature, which is the
basis of all Internet transactions.
Troika-Dialog’s Moryakov said amendments to
existing regulations of the Federal
Committee on Securities must be introduced to
allow brokers to produce an
electronic version of their reports to
clients without printed copy. “Also, the exact
procedures of receiving the bid from the
client and fixing the time of it must be
defined in some regulatory act,” he said.
Apart from these problems, brokers and their
clients have to deal with
information-protection and customer-privacy
issues. As for protection against
false information and fake press releases and
company reports, which are being
distributed in the Internet to misinform
inexperienced individual investors, the
Russian Internet has seen no such attacks
yet. Observers say they will come,
however, when the number of individual
As for now, brokers are not sure it is time
to speak of a coming boom. “There is
still a low percentage of the population that
has access to the Internet, and these
are not necessarily the ones with the highest
income or savings,” Karlov said.
Moryakov from Troika said he did not expect a
major increase in the number of
clients, invested sums and stock turnover in
the near term, but he added that
Troika nevertheless wants to begin its
operations now and get a jump on any
Experts say Internet trading will not replace
traditional stock-market institutions.
“For many clients, face-to-face communication
with their brokers is essential.
Usually they do not have access to the whole
information and need to talk with
their brokers,” Karlov said.
“The Internet is simply another media for the
brokers and their clients. Its up to
the client to decide if he prefers the
broker’s service through cables and wires. I
think, however, that ‘live’ discussion with
clients will remain an important part of a
broker’s business,” Moryakov said.
(Sites featuring online trading include alor.ru, aton-line.ru, bfc.ru, onlinebroker.ru,
interspread.ru, lanta.ru, mfc.ru, open.ru and