Electronic trading heavyweights in the Big Apple, what can be learned?

Noam Stiekema

  Electronic trading is no new word in the trading world. FX, CFDs, Options, Futures, Shares. You name it- it’s tradable online today. But how does one take a more traditional asset class like shares and totally take it mass market for retail punters? Apparently, quite easily. During a recent trip to NYC, after a good […]

Electronic trading heavy weights in the Big Apple, what can be learned Op-ed

 

Electronic trading is no new word in the trading world. FX, CFDs, Options, Futures, Shares. You name it- it’s tradable online today. But how does one take a more traditional asset class like shares and totally take it mass market for retail punters? Apparently, quite easily.

During a recent trip to NYC, after a good burger at the Black Iron Burger in Midtown (highly recommended), wandering uptown on foot, we were quite taken aback by the sheer number of electronic trading companies with a physical “retail space” presence beckoning passers-by during their daily routines.

Trade Stocks, Options, Futures… Easily setup an account… Retail language.

Three main banks / brokerages could be seen across NYC; E*TRADE, Scottrade and Charles Schwab. The remarkable thing about these three is they are proof that electronic trading is not only attractive to smaller retail punters but can be marketed in unique ways to ensure that services offered are marketed to a larger retail audience base.

 

 

The above campaign, albeit getting a little older now,  involved the company having invested millions in marketing its services to the retail customers. Education, free tools, 24/7 support… One could almost say it’s child’s play! In reality, punters are trading legitimate equities packaged beautifully, simply into a product that no longer scares investors with smaller investments or that simply want to have a go at investing.

Let’s not forget that this is America, and regulatory requirements by firms like E*TRADE, Scottrade and Charles Schwab are still required to adhere to some of the strictest regulatory laws on the planet. However, we can still see looking at the reported figures, these shops are a lot larger than many brokerage firms in the FX/CFD space combined.

Sophisticated investors vs. mum and dad?

Is the product (equities) attractive, more so than FX for example? On the surface, at a glance, can one spot the difference between the two asset classes on offer (FX or Equities)?

What about Options, Futures and ETFs? If you have had any experience with trading options (real options), you and I both know that Options aren’t exactly “newbie” friendly. How is it so that E*TRADE for example, can take a product like Options and make it available to trade at the click of a button?

Is the target audience purely sophisticated investors or have they got a knack for making complicated products easy to understand.

Going back to FX. You spend time in a brokerage and you quickly encounter the saying, people don’t necessary want to trade. I think the above proves this theory wrong.

What can be learned?

FX, CFDs and even Binary Options can often be perceived as bottom feeder asset class. Based on some of the retail horror stories out there customers can be quite right in making this assumption.

Taking a step back and comparing FX to some of the asset classes offered by the likes of E*TRADE or Scottrade and you’ll quickly see that once put into an electronic trading pro retail box; and you have a very similar product as a whole.

Add a pinch of leverage, some bonus offers and the competitiveness of the FX industry and punters aren’t spoiled for choice.

As an FX broker there are many lessons or tips rather than can be taken from the electronic trading scene of other asset classes.

  • Don’t be shy about your product. FX has its own unique value propositions. After spending time with the likes of Cantor exchange, we quickly realised it is all in “how you sell it” mindset. Even Binary Options, done and treated right, have a place and is part of the spectrum of financial instruments available to traders.
  • The retail store- this concept is exciting and we feel has value for a number of reasons.  Im sure you’ll agree.

The formula is the same. Free this, cheap fees, 24/7 support, education and free research analysis etc. The big shops like E*TRADE are simply selling a different asset class. The customer still logs in, funds his/ her account, navigates a platform and buys or sells an instrument.

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