- eToro reimburses customers after selling Russian stock at rock bottom price last week
- Major Russian companies still trading in London because they have primary listings there
Sanctions against Russia and the suspension of Russian-listed securities has caused chaos in parts of the market this week, investment platforms included. AJ Bell has revealed steel manufacturer Evraz (EVR) and precious metals mining company Polymetal (POLY) were its first and second "most bought" shares over the past week. Both companies' market capitalisations plunged but this has led some to buy in as an opportunity to reap dividend payouts potentially higher than the cost of the shares. Freetrade reported a similar trend, with Evraz at the top of its UK share trading chart and Polymetal at fifth.
The risks in owning Russia-exposed companies were shown by multiple recent trading issues, on top of the possibility of further financial sanctions. The London Stock Exchange cancelled all trades in Polymetal shares that occurred in a 20-minute period on 8 March as the share price was rebounding following dramatic falls. The exchange said in a notice this has been down to "erroneous" trades.
Trading platform eToro is handing money back to customers who owned Magnit (RU:MGNT) after the Isreali-headquartered company automatically sold their positions in the Russian supermarket on 4 March when the value of the shares fell to as low as 1¢ (0.8p).
A spokesperson from eToro put the automatic sale of the shares down to an “operational issue”.
"We are required to consider extreme and unforeseen market conditions beyond our control, and to take immediate action which may include delisting or closing positions on certain instruments," the spokesperson said.
eToro, which has 27mn registered users globally, would not disclose how many customers were affected but said it would be issuing a “one time reimbursement for the total initial invested amount of real stock positions.”
The Moscow Stock Exchange has been closed since 25 February, while American Depositary Receipts and Global Depositary Receipts of Russian companies listed in London have also stopped trading. But eToro said it has “removed 14 Russian stocks and USD/RUB from the platform.”
“These stocks are closed to new investors, but current investors can still hold their positions. Magnit is the only stock to have been liquidated,” the spokesperson said.
As shares purchased via platforms are held in a nominee accounts, this enables platforms to sell stocks without the permission of customers in extreme circumstances.
But Charlie Musson, a spokesperson for AJ Bell, said its Youinvest platform would only sell shares in very specific circumstances including if the investor owed charges, failed to provide the correct tax documentation or a corporate action or regulatory change meant Youinvest could no longer own the investment. “In all cases we’d notify the customer first and they’d normally have a chance to rectify the situation,” he added.
The suspension of trading of some Russian companies and the closure of Russian funds will "inevitably re-table liquidity risks as a debate, with some arguing that we need higher barriers to entry for illiquid investments,” said Holly Mackay, chief executive and founder of Boring Money.
