The interesting case of Gotrade’s new US stocks offering in Indonesia
After racking up over 500,000 users from over 140 countries in its first year, Gotrade enters Indonesia, in partnership with local broker Valbury, the Jakarta Futures Exchange and the state-backed Futures Clearing House of Indonesia.
Gotrade has launched the first platform in Indonesia to offer market access to the U.S. stock market through fully backed contracts. The broker allows users to invest in stocks and ETFs without commissions or hidden fees.
After racking up over 500,000 users from over 140 countries in its first year, Gotrade enters Indonesia, in partnership with local broker Valbury, the Jakarta Futures Exchange and the state-backed Futures Clearing House of Indonesia. Andrew Haryono, the owner of financial services conglomerate Valbury has joined Gotrade Indonesia as co-founder.
The broker raised $15.5 million in a funding round led by Velocity Capital Fintech Ventures, bringing Gotrade’s total funding to date to $22.5 million as Velocity’s Don Montanaro joins the Board alongside LocalGlobe’s Remus Brett.
The money will help Gotrade grow its team of 40 and launch localized versions of its product in various markets, starting with Southeast Asia. Launching local versions of Gotrade will allow the company to start offering its product in local languages with local deposit methods across the region, which the company expects will unlock significant further growth.
The fundraiser also counted with capital from MUFG, BeeNext, Kibo Ventures, as well as existing investors LocalGlobe, Social Leverage, Picus Capital, and Raptor Group. In 2021, Gotrade raised a $7 million seed round from LocalGlobe and Social Leverage, both early backers of Robinhood.
Also last year, Gotrade received clearance from the Labuan Financial Services Authority of Malaysia, which allowed the platform to roll out an invite-only platform in March 2021, launching publicly in September 2021.
Don Montanaro, from Velocity Fintech and prior founder and CEO of TradeKing, commented: “Everyone deserves the right to invest in their own future and control their financial destiny, and from the first moment we met Rohit and the fantastic Gotrade team, we knew they would succeed in delivering this power to Indonesia, Southeast Asia, and beyond,” said Velocity’s Montanaro. “Combining a simple, safe and friendly mobile app experience with fractional trading at zero commissions is a proven winning formula around the globe. As experienced investors and operators in this space, we’re thrilled to lead this investment round and excited to support Gotrade through every step of their journey forward”.
Gotrade generates revenue from 0.50% to 1.20% in FX fees
With no marketing, Gotrade was able to onboard over 500,000 users from over 140 countries as word of mouth and customer referrals were enough for such success. Clients have transacted over $400 million to date across more than 5 million trades. The broker’s ambition is at its highest and the $15.5 million will certainly fuel further expansion and trading volumes.
Founded by Rohit Mulani, Norman Wanto, and David Grant in 2019, Gotrade offers access to fractional shares in global giants on the NYSE and NASDAQ from as little as $1.
Gotrade charges no commissions on its trades, but unlike Robinhood, it does not adopt the controversial practice of monetising from payment for order flow.
The broker generates revenue by charging 0.50% to 1.20% in FX fees (depending on the source currency) if users choose to deposit their funds in local currency that is then converted into U.S. dollars for trading.
Gotrade is also currently testing a premium membership product called Gotrade Black that gives its users access to premium features including candlestick charts, analyst ratings, target prices and a risk measurement, all for a $2 monthly membership fee.
Rohit Mulani, co-founder at Gotrade, said: “Investing in Southeast Asia is broken. Over 600 million people can’t access quality investment products at fair prices. They are subject to mutual funds with expense ratios exceeding 5%, savings products like gold with 3% spreads and hidden fees peppered across their portfolios – not just by the incumbents but also by the companies that are meant to be the disruptors. We believe that investing should be fair and users should not have to bear these predatory costs.”
Indonesia brokers not allowed to offer foreign securities
Gotrade picked Indonesia as the first market to launch a local version of the platform. Local brokers are not permitted to offer foreign securities within Indonesia, but are permitted to offer derivatives of foreign securities.
This led Gotrade to partner with Valbury Asia Futures, the Jakarta Futures Exchange and the Futures Clearing House of Indonesia – all regulated by Bappebti, the derivatives regulator in Indonesia, to design a fully backed derivative that gives the end users market access to U.S. stocks.
All trades are sent to Alpaca Securities LLC, a FINRA licensed broker-dealer in the U.S. and executed at the National Best Bid and Offer as per the U.S. Securities Exchange Commission’s regulations.
As the trades execute directly in the U.S., all contracts on Gotrade are fully backed by real shares held in the U.S. This arrangement is supervised by Bappebti, the derivatives regulator in Indonesia.
Incoming co-founder Andrew Haryono, who has been in the industry for over 20 years, has been involved since the earliest days of Gotrade in 2019 and has been instrumental in its success. David Grant, former CEO of Charles Schwab Singapore, is also co-founder.
Gotrade also announced two senior executive hires with Tan Hui Lynn and Jeremy Ng joining Gotrade as General Counsel and Chief Financial Officer respectively.