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 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

Executive Moves

TradeZero hires Leo Ciccone as Chief Compliance Officer (CCO) for TradeZero Canada

“Leo brings to TradeZero broad and comprehensive experience coupled with deep business and regulatory relationships that will assist us in ensuring we meet and exceed industry best practices and to further our growth initiatives going forward,”

Institutional FX

Apex launches fractional fixed income trading for retail investors

“The ability for people – and not just high net-worth investors – to easily add fixed-income and diversify their portfolios is a game-changer.”

Institutional FX

MarketAxess launches Open Trading for EM local currency bonds

In an era where diversification and hedging against market risks have become imperative, this new feature could very well serve as a linchpin for international investors looking to diversify their fixed-income portfolios with EM local currency bonds.

Industry News

CFTC Chair Behnam’s keynote speech at FIA Expo 2023 focused on FX and Crypto frauds

Over the past fiscal year, the CFTC has levied more than $6 billion in monetary relief through various enforcement actions. The agency is also moving against entities falsely claiming to be CFTC-registered futures commission merchants (FCMs) and registered foreign exchange dealers (RFEDs).

Market News

Australia’s Trilateral Economic Ties with the US and China

Australia’s leading stock market index, the S&P/ASX 200, has been on a downward trend for the past three weeks. From a technical perspective, the price still remains in a consolidation, but the occurrence of lower highs indicates increasing selling pressure, and potentially a descending-triangle.

Digital Assets

Mirror Trading victims to recover 50%-60% of their money back

The liquidators overseeing the Mirror Trading International (MTI) pyramid scheme said they could start returning funds to victims once they receive a court ruling on how to handle claims.

Digital Assets

Celsius aims to start customer repayments in two months

Celsius Network, a crypto lender currently navigating bankruptcy proceedings, revealed its intention to begin reimbursing its customers before the year’s end. This disclosure was made during a hearing on October 2, where the approval of Celsius Network’s reorganization plan was being discussed.

Metaverse Gaming NFT

FBS Unveils Best Day Trading Strategies for 2023

FBS, a global trading platform, reveals criteria for stock day trading in 2023 and highlights seven companies, including Tesla and Apple, as promising options for day traders.

Digital Assets

Sygnum secures full payment license in Singapore

Zurich-based fintech startup Sygnum has obtained approval from the Monetary Authority of Singapore (MAS) to begin offering regulated cryptocurrency services in the country.