Mathematician Karel Janeček runs the firm RSJ Algorithmic Trading, one of the world’s biggest financial derivatives traders of its kind. Located on just two floors of a building in Prague’s historic Malá Strana district, the company has an annual turnover more than 230 times bigger than the Czech Republic’s budget. Last year, the 38-year-old entrepreneur established a foundation to support science and research while recently, he crated a fund to fight corruption in the country by supporting whistleblowers. Last week, the fund awarded 500,000 crowns to Libor Michálek who disclosed a corruption case at the Czech Environment Ministry. Radio Prague sat down with Karel Janeček at his company headquarters, and asked him what made a successful businessman like him launch a private campaign against corruption.
“I’ve always tried to do something about things I don’t like, that make me upset, and corruption in the Czech Republic has unfortunately reached enormous volumes. It’s huge and it’s very devastating for the economy. So I’ve been thinking about it for a long time, a year or two, and I realized that I was in a unique position because our business is completely independent of the state government, which gives us an opportunity to change something.”
Why did you decide to establish your fund, and not support one of the existing anti-corruption watchdogs, like Transparency International, or some of the Czech groups?
“Well, when I do something, I try to have it under my control as much as possible, and frankly, I’m little afraid that many of these NGOs are not very effective. They are fighting for survival, and as I’ve said, I have trust in my skills and those of my employees, so I believe that may be the best way to go against corruption. And I also believe that public support for a successful businessman might attract other people as well.”
Have you had any whistleblowers contacting you since you announced your anti-corruption project?
“We had quite a few people contacting us. As you probably know, the fund was officially launched some ten days ago so we could not look through al the cases, but we do have several more people who have contacted us, and we will look into that in the coming weeks.”
What could realistically be done, and should be done, to curb corruption in the Czech Republic?
“There should be a lot of changes to the legislation concerning public procurement. There are two specific cases that we know about, and are quite easy to fix. One of them is the cancellation of bearer shares in paper form. There are only three countries in the world that still allow them: Nauru, the Marshall Islands, and the Czech Republic. These bearer shares in paper form have no economic sense; the only reason why they exist nowadays is to use them for corruption, for bribing. That’s one of the things that should be cancelled.
“The other thing that we’ll publicly push for is an analogy to the US False Claims Act; a law that supports and protects whistleblowers. The support and protection should be done by the state; in this sense, our private endowment fund will substitute the state but of course, we will try to apply as much pressure on the government to introduce these new laws. Other countries in Europe might not have these laws but we have a big problem with corruption so we should go for that.”
Are you planning to lobby among politicians to see this and perhaps other things to happen?
“You might call it lobbying in a sense but it’s more like that we will present our opinions through the media. If many people call for these changes, and we will motivate them to raise their voices, the political parties will be forced to do something for a simple reason: they will not want to lose voters. This is in fact something very positive about our society – people recently became much more vocal, and I believe the society is ready for a change. If you compare the situation to five years ago, people would occasionally say something against corruption but they didn’t think it could be changed. But nowadays, people step in and we would like to support them in the media as much as possible.”
Whistle-blowing in the Czech Republic might be a bit tricky, given the country’s history that include four decades of communism, where any such activity – reporting to the authorities – was considered something morally questionable. Are you concerned that people are still afraid to stand up and say something because of the stigma?
“That’s a fair point. The way I look at it is that there is a deep hangover from communism among our people. Many of them, and even those who are not corrupt, and are relatively smart, are somewhat afraid that whistle-blowing is some kind of selling out. That’s a completely absurd way of thinking. Say you see robbers stealing from your neighbour’s house – when you call the police, are you selling out? Is that something bad? Everyone in their right mind would say, ‘of course, you should call the police’.
“Corruption is the worst kind of theft. It’s much more dangerous than stealing from houses and pick-pocketing, so obviously, people should call the police. And brave people should try to get evidence. That’s one of the big things that fund needs to do – to change people’s way of thinking a little, to explain to them that reporting corruption is a brave thing to do.”
A successful anti-corruption fund would be great vehicle for entering politics. What are your plans in this respect?
“As of now, I have no plans to go into politics. It might of course change in five years’ time but right now I want to successfully start the fund and to have control over it. On the other hand, I cannot be working full time on the endowment fund which I’ve done in the last several months. Unfortunately, it’s not that good for my business, so I want to again devote most of my time to RSJ.”
You are one of the owners of RSJ Algorithmic Trading, which is one of the world’s biggest algo traders with financial derivates. Is that only because you designed the best mathematical trading model?
“We are trading in the world’s derivative exchanges where indeed, we are perhaps one of the largest, or even the largest in the world. The reason for that is that we have done our work correctly and systematically. It’s all about the background of our people – top scientists and mathematicians.
“The way it works is that there is a big set of pointers, rather than one algorithm. We have huge number of algorithms working all together that have been developed over the last 8 years. It also turns out that competition is not that big, so that’s why we’re successful.”
Financial derivatives caught a lot of blame for the recent global financial crisis. Trading with them is now regulated in the US. How do you respond to that criticism, and has the regulation affected your business?
“Indeed, trading with derivatives – but we have to stress that trading with OTC derivatives, non-transparent, Over The Counter derivatives – was one of the factors that contributed to the financial crisis. I would like to point out however that this was not the main reason behind the crisis. The main reason was living on debt which started in the early 2000s when interest rates in the US were too low, and so on. The OTC derivatives factor was that they deepened the crisis. If there were no OTC derivatives, the problem would have probably emerged earlier.¨
“On the other hand, if you’re talking about derivatives exchanges which are fully transparent, it’s in fact the opposite. That’s why the current regulation is trying to move as much trading as possible from OTC to derivatives exchanges, and that’s very positive, and it’s good for our company, too.
“Our company was negatively affected by the crisis in 2007, before the actual financial crisis started. Back then, the futures markets already knew about the problems with mortgages and there was huge volatility and unexpected changes, and we had some problems with that. But later, in 2008, our models were already adjusted, so we were fine.”
You are a very wealthy man. Do you feel a temptation to leave everything behind and just enjoy what you’ve earned until the end of your life?
“No, I don’t feel this temptation at all. I would be very bored, so
that’s out of the question.”
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