An initial public offering (IPO) provides investors with the opportunity to buy shares in a company before they go public, which can provide significant upside potential. However, the success of an IPO depends largely on choosing the right broker. In the context of sanctions and restrictions in force in the Russian market, choosing a broker becomes even more important, as many foreign investors are deprived of access to the Russian market. This article will cover the main criteria for choosing a broker for participation in an IPO, as well as additional aspects that need to be taken into account, such as the client base, the broker's participation in a syndicate, and access to various exchanges.
Why is choosing a broker important for participation in an IPO?
Choosing the right broker can significantly affect the success of an IPO investment. In the context of sanctions, when foreign investors' access to Russian assets is limited, it is important to consider the broker's client base and its capabilities in the Russian market. Some brokers may only provide access to the Moscow Exchange (MOEX) or the Saint Petersburg Exchange (SPB Exchange), and not all companies are eligible to participate in a syndicate of brokers organizing an IPO. Therefore, it is important to consider many factors when choosing a broker for participation in an IPO.
Key criteria for choosing a broker for an IPO
1. Access to IPOs and conditions of participation
Not all brokers provide access to initial public offerings, especially in the context of sanctions and restrictions. It is important to check whether the broker can provide access to specific IPOs and on which exchanges they are taking place.
Types of IPOs and participation in a syndicate: In the context of sanctions, many foreign brokers cannot offer access to Russian IPOs. It is important to choose a broker that participates in a syndicate of brokers organizing the placement of shares and has the ability to offer its clients access to current IPOs.
Exchange for the IPO: In Russia, IPOs can be held on the Moscow Exchange (MOEX) or the Saint Petersburg Exchange (SPB Exchange). Make sure your broker has access to the exchange you need.
2. Commissions and hidden costs
Commissions can have a significant impact on your investment returns, especially in volatile times. There are different types of commissions to consider:
IPO participation fees: Some brokers charge additional fees for access to the offering.
Exchange trading fees: Trading conditions may vary depending on the exchange. Check if there are fees for trades on the Moscow Exchange or the St. Petersburg Exchange.
Account maintenance fees: Check the account maintenance terms to avoid unexpected charges.
3. Broker reputation and reliability
A broker’s reputation is especially important in the context of sanctions and limited market access. Brokers that have a good reputation and many years of experience can provide a higher level of security and quality of service.
Experience with Russian IPOs: Check whether the broker has previously participated in organizing an IPO on the Russian market.
Regulation and Licenses: Make sure the broker operates under the supervision of regulators and complies with all legal requirements.
4. Information Support and Analytics
In conditions of limited access to international markets, high-quality analytical support is important. Brokers that provide up-to-date information and reports on the market will help investors make informed decisions.
Analytical reports on the Russian market: Check whether the broker offers analytics and forecasts for IPOs on the Moscow and St. Petersburg Stock Exchanges.
Webinars and training: Find out whether the broker offers educational programs, especially in the context of sanctions, when access to foreign analytical resources is limited.
5. Technological platform and access to exchanges
The platform should provide convenient access to the necessary exchanges and support all the necessary functions for participation in the IPO and further trading.
Access to the Moscow and St. Petersburg Exchanges: Make sure that the broker has access to the exchanges where the IPO is held, as well as the ability to trade shares after the placement.
Interface and functionality: The technological platform should be convenient and functional, support mobile devices and ensure fast trading.
6. Trading conditions after the IPO and features of the Russian market
After the start of trading, shares may be subject to volatility, especially in the context of sanctions and restrictions. It is important to consider:
Access to different trading instruments: Some brokers may provide limited access to financial instruments, which may affect trading strategies.
Margin trading and leverage: Check the margin trading conditions on different exchanges, as they may differ.
Consider sanctions and restrictions
Sanctions and restrictions imposed on Russian companies and financial institutions significantly affect market access and trading conditions. Therefore, it is important to consider which brokers have access to Russian exchanges and participate in the syndicate of brokers organizing IPOs. Due to sanctions, many foreign investors have lost access to the Russian market, which has led to a decrease in liquidity and a change in market conditions.
Broker client base: Check who the broker cooperates with - these can be both local and international clients. Brokers working with Russian investors have more opportunities to participate in local IPOs.
Regulation and compliance with legal requirements: Make sure that the broker operates in full compliance with Russian legislation and sanctions requirements. This is especially important to avoid problems with the withdrawal of funds and trading.
Choosing a broker for participation in an IPO is becoming more difficult in the context of sanctions and limited access to the Russian market. By considering factors such as broker participation in a syndicate, access to exchanges, commissions and analytical support, investors can choose a reliable partner and minimize risks. The approach to choosing a broker should be thorough in order to extract maximum benefit from participation in initial public offerings on the Russian market.
