New entrants for online trading

The SC said the entry of the players can bring about healthy competition, potentially benefiting investors with a wide range of options and opportunities.

TWO foreign stockbrokers will soon be making their entry into the online stock broking market in Malaysia, adding more competition to an industry already up to its neck in rivalry.

Hong-Kong based, Nasdaq-listed Futu Holdings Ltd recently launched its investment platform called moomoo while Webull Corp, owned by Chinese group Fumi Technology is also believed to be doing the same soon.

Sources say while Webull has a licence to only do dealing and, therefore, will need to work with a local brokerage for settlements, moomoo has obtained the approvals to do both dealing and settlements.

Both companies, however, seem to have carved out their forte, which is enabling investors to trade international markets such as the US market, at very low fees.

According to Futu’s website, the company’s services include trading, clearing and settlement, wealth management, margin financing and securities lending as well as corporate dealings.

These are done via two online platforms.

Firstly, Futubull, which it says is its “proprietary digital platform that allows investors to trade securities in various markets.”

“Specifically, Futubull provides real-time stock quotes, market data and news as well as an interactive investor community where our users and clients can exchange investment views and ideas.”

The other platform which it will run in Malaysia is moomoo or what it calls its “international version of Futubull specially designed for overseas investors.”

On its website, the group says “with moomoo, investors not only open an online account for free and enjoy commission-free trades, but can also easily access real-time quotes, in-depth industry analysis and an extensive collection of up-to-date financial information.”

Futu was founded by Leaf Hua Li, who had worked in several different senior roles at Tencent, including being head of its multi-media business and innovation centre.Futu’s strategic investors include Tencent Holdings, Matrix Partners and Sequoia Capital. On its website, the company lists “received approval-in-principle of Capital Markets Services Licence (CMSL) from the Securities Commission (SC)” in May as its latest milestone.

Other significant events for it include its user base exceeding 20 million in March, entering the Singapore market in 2021 and the Australian market last March.

Webull also allows investors to trade global stocks, with its platform providing investors free trading tools like analyst research and ratings, financial news as well as data, according to its website.

The trading platform was recently launched in Japan, following launches in Singapore and Australia.

SC says entry of new players can be healthy

Meanwhile, when asked about the entrance of the new players, the SC tells StarBizWeek that the move is part of its initiative to develop and grow the capital market through greater adoption of digitisation and technology.

“This is in order for the capital market to remain attractive and accessible for a wide range of investors,” the regulator says.

The SC adds that it is open to considering the entry of new players that bring with them unique value propositions that will drive growth and diversify the range of services available to investors.

“For these reasons, we welcome all innovative digital business models and are encouraged by the strong interest received from the industry locally and regionally with extensive international presence to attract and promote international investors into the Malaysian capital markets.”

On how new foreign players will impact the existing brokers, it says the entry of the players can bring about healthy competition, potentially benefiting investors with a wide range of options and opportunities.“The investor community in Malaysia has expanded significantly, and technological developments have altered how investors interact with the capital market.

“It is crucial that our industry develops well to satisfy the various needs of investors. For example, algorithmic trading platforms, multi-asset brokers for more experienced investors, or digital-only brokers that can serve investors seeking no-frills services.“At the same time, we recognise the importance of maintaining a level playing field for all players in the market, and we will continue to work closely with stakeholders to ensure that this is achieved.”Notably, the entry of the two platforms comes after two other foreign-owned online trading platforms were licensed in Malaysia.In 2008, FSMOne Malaysia, an online investment platform of iFAST Capital Sdn Bhd which is part of Singapore’s iFAST Corp Ltd, was established here.

In 2017, Japan’s Rakuten Securities, Inc part of Rakuten Group, Inc came in after partnering with Kenanga Investment Bank Bhd. The joint-venture said to be Malaysia’s first completely digital equities broker holds a restricted CMSL, allowing it to deal in listed securities and give investment advice.It should be noted that local stock brokers are already feeling the pinch from low trading volumes and the lowering of fees. For example, Kenanga Investment Bank says its stock broking segment reported a loss in its first quarter ended March 31, 2023 (1Q23), compared to a pre-tax profit recorded for 1Q22.

It said this was mainly due to the fall in net brokerage, interest income and other income caused by lower trading volume on Bursa Malaysia.

It is understood that representatives of the local stock broking industry had voiced their concerns about the entry of the two foreign players.

Others, however, think that the competition will be healthy.

“Although the new brokers will pose a threat to existing brokers, the competition will definitely be good for clients,” an industry observer remarks.

He notes that the increasingly strict regulatory environment in China has caused these platforms to spread their wings to South-East Asia, where there is a healthy appetite for investing, and the region is seen as having potential.

The brokerage business in Malaysia, like most countries, has become more and more competitiven in recent years, particularly with the emergence digital investing which does away with the high fees that traditional brokers used to be able to impose on clients.