08.04.2026
To offer customers improved support in financial markets, LHV has established a new unit named LHV Markets. Juhan Peet, head of the unit, discusses what this means for the customer and how they can better hedge financial risks during volatile times.
To start, please explain in simple terms what LHV Markets is.
In short, LHV Markets is our bank’s financial markets department. It is the unit through which LHV’s customers gain access to markets worldwide.
The most well-known examples of financial markets are likely the equity and foreign exchange markets. Every time you buy or sell shares or exchange currency in your LHV account (for example, euros to dollars to purchase stocks), these transactions reach LHV Markets. Simple equity trades go directly to the exchange automatically; the bank does not need to intervene here. When customers exchange currency, LHV itself acts as the counterparty. This means we aggregate these trades and, at a certain frequency, cover customers’ trades all at once. In that case, the counterparty is another bank, as currency is not traded directly on an exchange.
LHV Markets also intermediates bonds for customers. It is easier with bonds traded on the Baltic exchanges because the trades are executed on the exchange. However, the turnover of Baltic exchange bonds is relatively small, and customers conduct most transactions outside the local market.
To intermediate bonds, a broker must first find another bank or brokerage firm that holds those bonds, or knows where to find them, or wants them. We then agree with the broker at what price they would be willing to buy or sell them. If the price suits the customer, the broker can finalise the transaction. Negotiating bonds remains – against the backdrop of otherwise largely automated transactions – the ‘classical’ brokerage work seen in movies. However, brokers do not shout at each other in the office like they do in films, but communicate through dedicated chat applications.
But not all transactions are that simple. Sometimes customers wish to buy or sell a large volume of shares at once; this is called a block trade. If a large order were simply sent to the market, we would likely be unable to execute it successfully for the customer because there isn’t enough liquidity on the market. In such a case, it is more sensible for the broker to find a buyer or seller for these assets and for the trade to be agreed upon separately between the parties without disturbing the market. Usually, such transactions are made between funds and large investors; rarely does another bank conduct a block trade.
Transactions used for hedging foreign exchange and interest rate risks are also handled at LHV Markets. Sometimes customers know quite well what they want and require little advice. This is more often the case with FX hedging transactions. In contrast, before entering into transactions necessary for managing interest rate risk it is important to provide the customer with more advice and to structure the transaction so that it aligns with the customer’s loan schedule and actually works as intended.
Intermediating both FX and interest rate risk products also requires finding a counterparty for the trade, as the bank generally does not take them into its own portfolio. Intermediating these products means more work for us because they are not traded on an exchange like stocks.
A leverage loan is also an LHV Markets product. This means that, against the collateral of certain stocks, one can take a loan from LHV to make new investments. This way, the customer does not have to sell assets they plan to hold long-term, but can instead leverage their portfolio further within certain limits. Leverage carries its own risks, as investing always does, and these must be understood beforehand.
Markets also offers support to customers in using the LHV Trader platform.
In summary, LHV Markets is the bank’s financial markets department through which customers can access various assets – be they stocks or bonds – and we also help customers manage financial risks. We advise on both FX and interest rate risk and offer the transactions necessary for hedging. Under certain conditions, we provide loans to customers against shares for new investments.
Events on world markets in recent years, such as geopolitical tensions and inflation expectations, have brought financial risk management back into focus. How much has the current economic climate influenced the decision to launch the LHV Markets unit right now?
It is a chronological coincidence, but it confirms our hypothesis that financial risk management is important. Volatile markets combined with inflation-related risks simply reinforce this. LHV has actually been offering customers solutions for financial risk management for some time now. Markets now consolidates this expertise and these activities under one roof, making them more easily accessible to the customer. Advising customers has become clearer and more holistic and does not depend directly on the economic climate. Rising interest rates, along with inflation expectations, have highlighted these risks more clearly for entrepreneurs. Therefore, the launch of the LHV Markets unit coincides with a time of high uncertainty and increased demand for hedging transactions.
You mentioned that LHV has already been offering both investment services and hedging solutions. Why was it necessary to bring these competencies together under one name now? What changes for the customer in practice?
The main reason was to create clarity. Previously, similar services at LHV might have been scattered across different departments, making it difficult for the customer to get a complete overview. With the creation of LHV Markets, all knowledge and experience related to financial markets were consolidated in one place. For the customer, this means several advantages in practice.
Firstly, the customer no longer needs to communicate with multiple departments. They can get answers to all financial market-related questions – whether they concern equity trades, FX hedging or bond investments – from a single source.
Secondly, the customer benefits from holistic advice. We work closely with the corporate banking unit to get a full overview of the customer. For example, if a company takes out a loan, an LHV Markets’ specialist can immediately draw their attention to interest rate hedging options. If we see that a customer has foreign currency turnover, we can, in cooperation with them and their manager, identify the contracts behind that turnover and the risks hidden within. This allows us to advise the customer on managing those risks.
Consolidating competencies also helps the bank optimise its operations. In the long run, this can mean better market access and better terms for the customer.
Do you see signs in the market that demand for risk management services among entrepreneurs is growing?
Certainly. The growth in customer interest has been clearly measurable, and the number of customer meetings has been steadily increasing. On one hand, LHV’s market share has increased year after year, and we hope to soon overtake SEB in the corporate banking segment as well. This is important because LHV has grown large enough. We no longer have restrictions on which types of customers we can serve.
On the other hand, uncertain times and rising interest rates, combined with past experiences, increase customers’ awareness of the risks they are exposed to and how these might affect their income statement. In a stable environment – where everything is fine in the economy and interest rates are low – one might not pay as much attention to currency and interest rate fluctuations. In today’s world, however, it is clearly visible that interest and exchange rates can change quickly and unexpectedly, and their impact quickly reaches the income statement. These changes are usually caused by events that are difficult to predict, and tensions tend to escalate rapidly.
Which type of Estonian company stands to benefit the most from LHV Markets’ services?
The most typical examples of customers who benefit most from our services are those who sell or buy products and services in foreign markets and settle in a currency other than the euro. These companies are exposed to currency risk. When operating with thin margins, a change in exchange rates can wipe out a company’s entire profit, but one does not even have to think that dramatically. Known cash flows in a foreign currency are worth monitoring with the mindset that it is likely sensible to fix these exchange rates in advance. It is also good to know future currency rates in the planning phase to assess the profitability of a project or turnover.
A second type of company benefiting from LHV Markets’ products are those with significant loan obligations. When interest rates rise, the cost of floating-rate loans can change significantly for a company. We saw this in 2023 and 2024 when Euribor rose to around the 4% level: it affected the cash flow of many companies, and not positively. Although Euribor receded to approximately the 2% level before once again starting to rise, it is not rational to assume that everything that goes up must come down. Hope should not be the only strategy.
Thirdly, we can talk about everyone who trades or invests in financial markets. Through LHV and LHV Markets, they gain access to a very wide selection of different assets.
What is your main argument to an entrepreneur who says they do not have time to deal with this?
Changes in the environment occur regardless of our will. If you cannot manage on your own, LHV can help. Even though base rates have risen, one must not forget that there could be a lot more room for interest rates to rise. Hedging is insurance, and paying a fee for insurance is logical and fair, much like the monthly premium for comprehensive car insurance. Making an insurance payment does not prevent an accident, but if risks materialise, it is better to be insured. Once an accident has already happened, it is usually no longer practical to get insured.
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