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. Last Updated: 07/27/2016

Internet Brokers No. 1 at MICEX

A year ago they were virtually unknown, but now Internet brokers are at the top of the Moscow Interbank Currency Exchange in terms of trade volume.

About half the transactions that take place on MICEX are done online. Internet brokers are locked in fierce competition with other operators, and have achieved astonishing results -- taking the No. 1 spot on MICEX's trade turnover ranking for August. Investment stalwart Troika Dialog was ranked 16th.

Furthermore, the overall leader isn't even a Moscow-based company; Brokerkreditservis, or BKS, is based in Novosibirsk, Western Siberia.

"The reason for our success is that we have worked successfully to attract clients; we have high standards of servicing, our advertising campaigns are well-organized and we have a broad work spectrum," said Vladislav Kovalchuk, head of the securities section with BKS's Moscow branch.

The Internet gives brokerages access to clients throughout Russia -- reaching as far as the Urals, Siberia, Moscow and other regions.

However, the big brokerages say there is another reason for the rapid success of the Internet traders -- dumping.

Several regional Internet brokerages work for virtually nothing. For example, URVB-Finansy reduced its commission levels to 0.008 percent, while Emi Trast charges only 0.01 percent.

As a result, the fight with Internet traders for retail clients on MICEX has become pointless, said Yevgeny Kogan, director of the trading department at CenterInvest Securities.

A broker who manages to move 1 billion rubles ($34 million) at a commission of 0.01 percent earns less than $3,500. "This kind of profit does not guarantee the upkeep of capable specialists. For that you need a more sensible level of commission -- 0.1 percent to 0.3 percent is more normal," said Kogan.

According to the bigger brokerages, regional companies are old hands at tempting clients away with low commissions. BKS agrees that there are companies that undercut the market, but it does not count itself as one.

"We haven't reduced our commission for over half a year. It suits us, and we don't plan to change it," said Kovalchuk. BKS's commission varies between 0.02 percent and 0.095 percent.

But profits of Internet brokers can't be compared to the profits of the big companies trading on the Russian Trading System. Based on results for the first quarter of this year, BKS earned around 800,000 rubles ($27,100), while fellow online brokerage Alor-Invest made 183,000 rubles, the Otkrytiye company made 165,000 rubles and Finans Analytik earned 15,000 rubles.

Over the same period, traditional brokerage Russ Invest made 131 million rubles ($4.44 million), Renaissance Capital 29.8 million rubles, while Troika Dialog brought in more than 14 million rubles.

But the head of the marketing department with Finans Analytik, Sergei Mikheyev, said the major investment companies had much higher overheads, with more staff employed and a broader range of services offered.

Whether an online brokerage or a traditional trader, investors choose the broker that suits them best. In June, Aton surveyed 100 investors that use the Internet to trade. Forty percent said the most important factor when choosing a broker was the professionalism of the staff, 30 percent said care for the client was most important, while 20 percent mentioned the tariff policy.