Russia's Markets Making A Comeback
Think of Russia and you think of vodka, cold, bleakness, bread lines...
"And the mafia," adds Josef Schroeter, president of CQG, which provides a hosted platform for trade execution, market data, and analytics for global electronically-traded futures markets and has won business recently with the Russian Trading System Stock Exchange and BCS Financial Group, a direct market access equity and derivatives broker that has 400 customers and internal trading desks in Russia.
Although Russia's stock market dropped 74% during 2008, "they're starting to come back relatively quickly," Schroeter says. "Russia, like China, had so much capital in cash that they were able to recover." Russia's economy is oil-based, he notes, and there are more millionaires in Moscow than in any other city in the world.
"It's still cold though," Schroeter adds, "and they're awfully serious people. There's not much of a middle class and if you're not in oil, a trader, a doctor or in one of the few other high-paying jobs, you're only going to make $400 a month." The rate of alcoholism among young men is high.
CQG has 300 developers in the Ukraine as well as Moscow, Kiev and other parts of Russia and has been getting Russian brokers to sign up for its platform. "It's easy for us because we're there and have business contacts," Schroeter says. "You need to know the local culture."
For instance, if a business person seems overly collaborative rather than authoritative, he or she will be viewed as weak, he says. "As in China, they'll try to drive the hardest bargain possible," Schroeter says. "They don't expect you to take it, but if you don't defend yourself they won't respect you."
CQG began hiring developers and traders in Russia in the late 90s, when it had a few small Russian customers and noticed that its systems were started to be hacked there. "We figured if these guys are smart enough to hack us, we should hire them," he says. The Russian staff are hard workers; they need to be available during the U.S. workday and many come in at 11:00 a.m. and don't go home until 10:00 or 11:00 at night. Two of CQG's Russian employees are grand master chess players.
There's a wealth of MIT-level developers in Russia, Schroeter says. Leningrad has a Miet University that's a duplicate of MIT — Russian architects literally visited MIT, took photos and built their university on that model. "The education system in Russian is better than ours, especially in math and science," Schroeter says. He called one of his Russian system owners while he was on vacation with his family in Disney World, who said he would have to call him back because his son was finishing his morning math problem.
The labor arbitrage of using Russian workers is not what it used to be, however. While in the late 90s a developer might make $600 per month, today it's more like $1,000 a month. "Before long we'll start to see parity," with U.S. salaries, Schroeter says.
But the Russian government has been friendly to foreign companies like CQG and taxes are lighter than here. Some ATMs dispense U.S. dollars.
In October, Schroeter will go to China to meet with government officials and exchanges to educate them on hosted trading platforms. "Most emerging markets don't allow this but are not against it," he says.