Chat while you trade: Introducing the world's first online social network investing site
Hong Kong is one of the world's financial capitals, but how about a leader in financial technology? A home-grown brokerage is well on its way to making the latter true. Named by Amazon last year as one of the top five start-ups in Asia, 8 Securities defines itself as a "social stock-trading service".
The company was founded by Mikaal Abdulla and Mathias Helleu, both formerly of E-trade, another online brokerage. The pair set out on their own two years ago with the idea of offering internet trading with a social platform.
Put most simply, it's Facebook combined with internet trading. People form networks on the 8 Securities platform. They can chat while trading and gather trading ideas from other people on the system. Users are automatically connected with other traders based on the markets they're in, level of investing experience and trading style.
The concept liberates people from a traditional dependence on sell-side research, by which large brokerages feed reports to fund houses. These reports find their way into the hands of public investors, but only after the ideas have been absorbed by the big institutional investors and the information fully reflected in the share price.
The site aims to empower users to connect with each other in order to swap fresh trading ideas and information. Every account holder picks an avatar, or an online identity that lets users keep their real identity under wraps.
To encourage authentic discussion - and to ensure that people are not using the site to pump up share prices - a user's financial transactions are visible to everyone. If they give advice about a stock, others can check to see if the person is backing up his or her words with actual trading.
Speaking at their office in the L Place in Central, the two founders say Hong Kong was a natural choice for their headquarters. The city is also hooked on social media, says Abdulla, adding: "The Facebook adoption rate [in Hong Kong] is one of the highest in Asia. That positive attitude towards using social media and investing made it very natural for us."
Despite having entered a crowded space - Abdulla calls Hong Kong "one of the most over-brokered cities in the world" - they point out that their competitors are very traditional. Compared to the United States and Europe, Hong Kong brokerages charge high commissions for handling simple transactions, while more streamlined online players impose trade or account minimums.
"Schwab has good pricing, but you need at least US$10,000 to open an account," says Helleu. He says E-trade is also cheap, but only if you trade 10 times a month or more.
8 Securities charges 0.08 per cent of the amount traded, compared to an industry norm of about 0.25 per cent. The pricing in the US is a flat fee of US$8.88 per trade - the many eights chosen for the pricing and company name to reflect the local association of "8" with prosperity.
Hongkongers need to commit a minimum of HK$10,000 to open an account. "One of the problems when you open a traditional brokerage account is that it's a static interface," says Abdulla. "If I'm a very active trader, it might not be enough. If I'm a beginner, it might be too intimidating. We're for everybody. You build the interface your way," he says, demonstrating the platform by dragging various apps onto its dashboard.
Abdulla describes his product as a Bloomberg terminal for the 95 per cent of people who can't afford one and for whom the information may be too technical, assuming Bloomberg terminals had trading capabilities and a social network.
He says the service has attracted about 55,000 users in nine months.
"What's really been a success is offering the US equity market," says Abdulla. "The market is growing for people trading on a cross-border basis. Our statistics show that Hong Kong investors are trading stocks that they use, that they interface with. So Apple is hugely popular, as is Microsoft, Starbucks and Nike. It's an alternative to the Hong Kong equity market which is driven largely by property stocks and financials, and is quite limited."
A pure online player, 8 Securities plans to launch in Japan in the first quarter. There are 60 million online investors in Japan, the biggest online-brokerage market outside of the US.
"We are the first brokerage firm based in Hong Kong to expand outside. It's usually the opposite - foreign firms come here," says Helleu.
He says the firm, which is backed by US$12 million from private investors, should be profitable in 2013. "It's only the beginning," he says.
"We're first looking to expand regionally, and then we can look at the rest of the world."