Industry Updates

GHCO writes off $1.1m after Russian broker collapse

Sova Capital fell into special administration a week after Russia’s invasion of Ukraine

Theo Andrew

a red and white ball in a net

GHCO has written off $1.1m in assets trapped in defunct Russian broker Sova Capital after it fell into special administration following the country’s invasion of Ukraine last year.

In its 2022 financial results, GHCO cut its losses following the collapse of the London head-quartered broker which filed for insolvency on 3 March after Russia was hit with a wave of financial sanctions from the west.

Consultancy firm Teneo was appointed joint special administrator of the Sova Capital, whose main business was to provide its clients access to the Russian markets.

In October last year, ETF Stream revealed Jane Street, Flow Traders and GHCO were all battling to recoup millions of dollars of assets from Sova, which held $1.85bn in custody assets and a further $249.4m in client money at the time of collapse.

GHCO previously said it was seeking to recover $3.3m in assets and expected to receive 40-60% of the value of its trapped assets within the next 12-24 months.

It said it had begun to reduce its exposure to Sova Capital in the week leading up to the start of the conflict, due to the “potential impact of GH LLP’s business” of sanctions levied on Russian-owned entities and the Russian National Settlement Depositary.

“2022 results were negatively impacted by the events in Ukraine which led to the insolvency of our clearing broker Sova Capital Limited, and the closure of Russian listed ETF market making activities,” the group said in its latest results.

The $1.1m was part of a $2.1m total write-down after it closed its GHCO Americas office and comes following a difficult year for the market maker, in which it reported losses of $12.4m for the year versus $4.5m for 2021.

Turnover from its UK business fell from $8.5m in 2021 to $2.6m in 2022.

A GHCO spokesperson told ETF Stream: "Over 2022, operations at the firm were meaningfully reduced due to the acquisition and associated costs prior to completion. While GHCO's market making activities closed in Russia, the business continued its expansion in Europe and to invest heavily in its technology to support the core business of contractual market making.

"The closure of GHCO Americas was a decision purely due to the transaction, Mirae Asset Securities having a strong existing presence in the US."

Last December, GHCO was acquired by Mirae Asset Securities (MAS) in a $40m deal which it says will give scale to compete with the two largest market makers in Europe, Jane Street and Flow Traders.

The market maker added losses were also felt related to “nonrecurring charges related to MAS transactions” as well as “ongoing expenses for systems development and expansion”.

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