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
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.”
“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.