Paradigm Shift in Financial Services Emerges as New Trading Platforms Debut - Our Take

Proshare


Saturday, July 05, 2014 9.16 AM / Share Support Service
 

Nigerian Capital Market community is set on an irreversible path that embraces the use of best-in-class technology to deliver investing services to investors, especially the retail market.
 

This move is sure to succeed given the re-configuration of how The Exchange’s information management system is now set up and we can expect that it would become a minimum for all stockbroking firms.
 

Indeed, it is expected to permeate the fabric of financial services delivery as more service providers key-in to the operating enablers happening all around; from the Central Bank’s cashless drive and Biometric exercise, to the developments in ICT infrastructure, the emerging software and solutions service industry to the growing use and preference for handhelds devises for social interaction.
 

These seemingly unrelated developments have only one possible outcome, a new race to the top and we at proshare have set up stall to monitor and report on the changes in order to keep the investor/consumers well informed.
 

While the banks took the lead/initiative much earlier one, it would appear that it is in the capital market where the B2C model would actually take off and offer the banks the opportunity for a sell-on service.
 

Since the Nigerian Stock Exchange (NSE or The Exchange) officially launched its new trading engine (X-Gen) in Q3 2013, the cue the introduction of new trading platforms by stockbroking and dealing firms was effectively flagged of.
 

The launch which was expected to revolutionize stockbroking activities in the Nigerian securities market has brought about the introduction of a few new trading platforms with Meristem Securities Ltd being the first ‘to the market’ with the launch of its Meritrade platform in March 2014.
 

To date, the following new products exist in the market, viz:

1.    Meritrade

2.    LeadTrader

3.    InvestNow

4.    MorganCapital iTrade

5.    Bancorp e-Trade
 

We understand that firms like Afrinvest, Cordros Capital and BGL are at different stages of project completion.
 

So what should we expect? 

Given that the use of technology would be a common denominator, key point of variation will come from the following areas:

1.   Being online does not necessarily mean being real-time and it would be necessary for firms to communicate accurately what they are offering, lest they be considered as deliberately misleading investors;

2.   Brokerage charges will have to be more flexible to reflect both the ‘DIY’ nature of the engagement and the competitive environment;

3.    Online service compliment to help drive through the acculturation required would be necessary at a cost which should drop as increasing coverage is achieved;

4.    Initial cost of set-up will not easily recoverable in the short term and the growth in patronage will influence management choices here – Go for growth in customers or go for growth in transactions;

5.   Eliminating the need to key in orders into The Exchange by integrating the online portal with operating systems, thus avoiding about two (2) minutes delay in transaction execution;

6.    Marketing of financial services will now have to take up a collaborative mindset in areas such as trade marketing, brand marketing, customer services, technology solutions, add-on services, media relations, social media interventions and mobile money for the local and Diaspora market;

7.    For a low value/volume segment of the market, a FMCG mindset will be required by winners; and

8.    Capital Base requirement would influence decisions by CMO’s. 

 

The Comparison  


   
 

                    Meritrade Platform is Innovative and World Class - The Nigerian Investor Q1/E3        WIP            The Key Economic Benefit of LeadTrader is Transparency – Dolapo Ashiru - The Nigerian Investor Q2/E4     MorganCapital Launches i-Trade; a cost-effective online, real-time trading platform - TNI Q3/E1     N/A
                    Meristem Securities Inaugurates Online Trading Platform      

 

 
 Similarities & Differences

 The similarities from the table above will include: 

      Trade Online. Anywhere, Anytime;

      Ability to place buy/sell order;

      Account opening can be done online;

      Availability of online payment system;

      Online transaction/portfolio monitoring.
 

The differences or easily identifiable service points from the table above will include:

     Major of the dealing firms fixed their brokerage fee at 1.35% while one (MorganCapital) reduced its fee to 0.25%.

   Account opening balance of the various firms ranges from N50,000 to N20,000 to N1,000 with UBACapital requiring a Zero balance to start off.

     Not all the sites have a real-time ability. We intend to test these claims and report on thereof. 
 

Eliminating Clutter and Confusion with Terms – Key Definitions to Note*  

E-Trade / i-Trade / u-Trade*

This simply reflects generic names for an electronic trading company designed to provide investors with a service to actively manage their portfolios and execute trades at their discretion. Trades are executed with a computer or smartphone device and are made quickly. Typically a user will login to a website (or App) and make transactions. This data is then routed to appropriate dealers and exchange specialists. The services that the company offers are appealing to consumers because of low pricing, low margin rates, and more control over transactions.
 

Who is the FIRST in the Nigerian Capital Market Space*

From our records, Meristem Securities was the first to do an official launch to the market with its MERITRADE and MERIBOSS services. Given that the operating means of achieving trade is through the use of the FIX protocol, launched in September 2013, no other service could be deemed to have started before this date. That said, it is trite knowledge that not a few firms offer some form of online services to their clients prior to now.
 

Process for Trading Real Time on the Nigerian Stock Exchange *

The orders flow through from the investor's device - smartphone or terminal - automatically to the broker's OMS platform, which undertakes a pre-trade risk assessment and then auto flows this to the Exchange's trading platform. Once the trade is executed, the investor's account is then auto updated on the broker OMS. There is no re-keying when using a certified online trading tool.
 

Who is actually offering Real-Time Services *

Factually, these engagements occur in near real time. When a system relays information to a user at a speed that is near instantaneous or has a short delay from when the event actually occurred. Online brokerages often provide a real-time data feed that displays stock quotes and their respective real-time changes, with a very insignificant lag time, so that clients can base their investing decisions on the most up-to-date information.
 

Investopedia explains 'Real Time' * 

While many financial websites do offer free stock quotes to the general public, many of these feeds are not real time and may be delayed up to twenty (20) minutes. Therefore, when viewing stock quotes from any financial website, be aware of the time that is posted near the stock quote to verify whether the quote is actually in real time. Possessing accurate real-time quotes is especially important for traders, as even the smallest time discrepancy between a provided quote and the real-time situation can change a profitable position into a loss.
 

What is the message that retail investors need to focus on? *

The experience is similar to online banking, investors can buy and sell securities online with minimum human interaction. They can see the prices and take immediate positions. In short, this is an investing DIY kit which is complemented by information services like Proshare’s TheAnalyst  – a service positioned more towards the self-directed individual investor.

Related News:
1.   
The Market Service Quality Report for May 2014
2.   
The Market Service Quality Report for June 2014
3.   
The Analyst - Nigeria's No1 Stock & Investment Site
4.   
NSE Guide to Market Quality Reports - Proshare
5.   
Review of the Meritrade Portal by Meristem - WEBTV
6.
   NSE CEO's Opening Remarks -Launch of ... - Proshare
7.   
The Key Economic Benefit of LeadTrader is Transparency
8.   
MorganCapital Launches i-Trade; a cost-effective online, real-time trading platform - TNI Q3/E1
9.   
Meritrade Platform is Innovative and World Class - The Nigerian Investor Q1/E3

 

*Acknowledgement
Definitions were sourced from the Nigerian Stock Exchange, Investopedia.com and investorwords.com
 
Disclaimer/Advice to Readers:
While the website is checked for accuracy, we are not liable for any incorrect information included. The details of this publication should not be construed as an investment advice by the author/analyst or the publishers/Proshare. Proshare Limited, its employees and analysts accept no liability for any loss arising from the use of this information. All opinions on this page/site constitute the author’s best estimate judgment as of this date and are subject to change without notice. Investors should see the content of this page as one of the factors to consider in making their investment decision. We recommend that you make enquiries based on your own circumstances and, if necessary, take professional advice before entering into transactions. This table of comparison/ ‘the data/findings’ is published for information purposes only and for circulation in/to our online investment community in accordance with the terms of usage and can change once an information is brought to our attention which may indicate an incorrect representation for which we are duty bound to correct. Further enquiries should be directed to the author whose e-mail is sss@proshareng.com. 

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