After a $100 million investment, Divisa CEO Mushegh Tovmasyan speaks to FinanceFeeds on all things prime brokerage

“The larger balance sheet will allow us to increase our access to liquidity via Prime Brokerage & Bilateral relationships and pass it downstream. It will also allow us to increase market penetration due to larger market appeal” – Mushegh Tovmasyan, CEO, Divisa Capital

Prime of prime relationships and the future

During the course of 2016, the prime brokerage sector was subject to a series of commercial circumstances which created a need to rapidly evolve and innovate, giving rise to a large number of new entrants to the sector, as well as spurring the continued modernization that the high quality household names have achieved.

Within that particular wave of development, London was the epicenter, with acquisitions having taken place, changes in counterparty credit risk policies by Tier 1 banks and new niches proliferating in the world’s number one financial technology, infrastructure and markets capital.

This week, veteran prime brokerage Divisa Capital begins 2017 with a $100 million investment, which is a remarkable dynamic indeed.

During the course of 2016, Divisa Capital had positioned itself as an evolutionary contender among London’s giants, with CEO Mushegh Tovmasyan at the helm.

In May last year, FinanceFeeds spoke with the Divisa Capital team in their London headquarters, where Mr. Tovmasyan explained the rationale behind the firm’s rebranding exercise which involved a new logo and website.

Mushegh Tovmasyan, CEO of the firm, explained “The Divisa Capital brand, established in 2008, has become a significant player in the FX industry. Divisa has managed to provide excellent liquidity and technology solutions to a rapidly growing client base.

“What started as a single niche brokerage has quickly become a multinational brokerage group of companies expanding in emerging market regions and diverse clientele. However, the different Divisa brands and products made it difficult to effectively communicate the strengths of Divisa Capital to existing and potential clients.”

mushegh
Mushegh Tovmasyan, CEO, Divisa Capital

“In early 2016 we decided that we needed to address the firm’s marketing message, and therefore began a rebranding exercise that resulted in a new website and logo.” Mr Tovmasyan continued. “We moved away from the traditional FX WordPress design structure and towards an inhouse designed proprietary system. This gave us much more scope to capture and convey the firm’s key products and values.”

Continual evolution such as this represents milestones in corporate progress, however the $100 million venture capital investment that will propel Divisa Capital in its future progress is a very large milestone indeed.

Today, FinanceFeeds spoke to Mr. Tovmasyan on the subject, beginning the conversation with the specific observation that it is rare for a prime brokerage these days to gain a large investment from a venture capital investor, therefore it would be interesting to take a look at how Divisa postioned itself for that kind of growth through its development stages, and how this attracted a venture capital investor at this stage in its establishment.

Mr. Tovmasyan explained “The investment is not from a VC but rather a very wealthy family office. Divisa went through an in depth valuation and due diligence process and at the end satisfying the investors with our financials, track record, Intellectual Property, business plan and growth targets. This is the tip of the iceberg and more good things are due to come in the course of the year.”

If 2016 represented a period of prime brokerage diversification and expansion, 2017 may well become the year of consolidation.

FinanceFeeds recently investigated in detail the potentially large scope in this direction as recent M&A deals have been hundreds of millions as massive venues continue to mop up institutional FX firms rather than retail client bases for a few million. We examined in great detail what will cause consolidation this year and why it will be much higher up the ecosystem and for very high values.

Divisa Capital’s round of funding is a case in point, and Mr. Tovmasyan concurs “Yes this is true, but will inevitably have a trickle down effect. Trump presidency, Brexit, FCA rule changes, Eurozone elections to name a few will definitely make an interesting year for the industry. Management experience, technology and balance sheets will be properly tested this year and we feel very confident about our positioning.”

Almost exactly one year ago to this day, during a meeting in the Asia Pacific region, Mr. Tovmasyan discussed with FinanceFeeds how the larger scale consolidations and acquisitions would dominate the future in the sectors of the FX industry at higher level than among retail brokerages.

Today, one year later, it would be very interesting to understand whether Divisa Capital is looking to grow an economy of scale, and if so, how its prime brokerage service be diversified to attract a global client base.

“Yes, I remember our chat and am very proud of Divisa’s achievement within the relevant timing. Divisa is planning to do a lot more of the type of business we have been doing in addition to introducing new products and services in due time. The larger balance sheet will allow us to increase our access to liquidity via Prime Brokerage & Bilateral relationships and pass it downstream. It will also allow us to increase market penetration due to larger market appeal” – Mushegh Tovmasyan, CEO, Divisa Capital

In terms of perspective on whether the Tier 1 bank counterparty credit risk conservatism toward OTC brokers will continue to have an effect, and on whether there is a way round this continuing consideration for non-bank OTC counterparties, this could well be a development period specifically for non-bank liquidity providers. On that basis, Mr. Tovmasyan concluded by elaborating on what type of liquidity takers in which sectors Divisa will position itself toward.

“I think the credit crunch theme will continue this year and quite possible get worse for OTC brokers if the carry trade comes back putting pressure on balance sheets and net open position (NOP) limits.

 

 

Read this next

Metaverse Gaming NFT

DCentral Miami brings together all of Web3, NFT, DeFi, Metaverse

The world’s biggest Web3 meeting entitled DCENTRAL Miami is set to take place November 28-29, featuring a lineup of some of the biggest and most influential names in the blockchain space.

Digital Assets

Crypto ban expands across UK banks as Starling joins ‎crackdown

UK digital bank Starling has banned ‎all customer payments related to cryptocurrencies, another blow for the crypto traders ‎who recently saw a sizable number of banks deciding not to ‎finance the wobbly asset class.‎

Interviews

Markets Direct at FIA EXPO 2022: Traders know what they want from brokers

The FIA Expo 2022, one of the most prestigious events within the global derivatives trading industry, took place in Chicago on 14 & 15 November.

Interviews

FIA Expo 2022: TNS addresses public cloud limitations with hybrid infrastructure

November is the month of the FIA Expo, one of the largest futures and options conferences in the world, bringing together regulators, exchanges, software vendors, and brokers in one place: the Sheraton Grand Chicago Riverwalk. 

Retail FX

Italy’s regulator blacks out Finance CapitalFX, MFCapitalFX

Italy’s Commissione Nazionale per le Società e la Borsa (CONSOB) has shut down new websites in an ongoing clampdown against firms it accuses of illegally promoting investment products in the country.

Retail FX

Suspected leader of Honk Kong ramp-and-dump scam appears in court

A leader of a sophisticated ramp-and-dump scheme made his first court appearance in a Hong Kong court today, charged with market manipulation and various criminal offences. The case stems from an earlier joint operation of Hong Kong’s financial watchdog, the Securities and Futures Commission (SFC), and the local police. 

Institutional FX

Cboe’s James Arrante discusses growing demand for fixed income, FX algo

We caught up with James Arrante, senior director of FX & US treasuries product and business management at Cboe Global Markets, to uncover emerging trends in the FX and fixed income markets and learn more about the bourse operator’s recent initiatives.

Retail FX

Eurotrader acquires UK broker Petra Asset Management

Eurotrader Group has formally entered into the UK market with the acquisition of FCA-regulated broker, previously named Petra Asset Management Ltd. The new entity operates under the brand name Eurotrade Capital Ltd.

Inside View, Retail FX

The Game of Chess Continues – OPEC, China and the Oil Market

Over the past decade, the US has been complaining about the amount of power which the BRIC group, and specifically China, has on the global economy. BRIC stands for Brazil, Russia, India and China; these were the world’s fastest growing economies. Only in the past 10 months, the US has turned their attention toward OPEC due to the prices of fuel. Nevertheless, China seems to have a strong influence even over the price of crude oil.

<