Wu Zhijian: The commission of securities firms will be getting lower and even zero. In order to improve competitiveness, securities firms need to constantly innovate, develop new products, or provide different services to meet customers of different age groups.
2021year3Mid month, Israeli online securities firmseTOROAnnounce that theSPACListed on NASDAQ. The company's valuation is approximately104USD100mn eTOROstay2007Established in Israel in, its initial main business wasforeign exchangeContract for difference（CFD）Trading platform. CFD is a financial derivative that can theoretically be based on stocksstock market indexForeign exchangefuturesConduct bet trading on various underlying assets with price fluctuations. Due to its ability to provide leverage to investors, price difference contracts are popular among many retail investors. Providing leverage to clients and encouraging them to borrow money to invest is not a new invention. In fact, any securities firm with a slightly larger scale can provide such services. In the segmented market of price difference contracts, there are many competitors of a certain scale, such asIG, CMCEtc. howevereTOROIt does not stop at the price difference contract. Since its establishment,eTOROWe have successively launched relatively innovative service content such as Bitcoin trading, zero commission trading, and sporadic stock trading. One of the most popular services is one click copy. The meaning of 'one click copy' is if you thinkeTOROWhich internet celebrity is there on the platformVOur investment ability is very strong, and there is a convincing investment method for you. If you click on "one click copy", you can always follow that internet celebrity and completely copy their positions and trading. Of course, you need to pay him some management fees. In fact, this model is equivalent to purchasing the fund managed by the internet celebrity. The difference lies in the fact that there is no fund, and the internet celebrity is not a professional fund manager, but anyone can copy someone else's positions and trading strategies at any time. Features like "one click copy" have become popular, and there is a certain inevitability in the occasional situation. In summary, there are several important reasons. These important reasons precisely reflect the historical changes that the securities industry has undergone in the past few decades. Firstly, transaction costs are getting lower and lower. Looking back at the history of the US stock market over the past few decades, we can clearly see that the trading commissions provided by securities firms show a clear downward curve. stay1970In the 1990s, the head of securities firms at that time were mainly so-called "full service securities firms", such as Merrill Lynch (later merged into Bank of America) and Tianhui Securities (later merged into Morgan Stanley). They provide comprehensive brokerage services to their clients, including trading, research, and new stock issuance, resulting in relatively high commissions, with an average of up to100~120Around US dollars. At the same time, the securities law at that time stipulated that the commission charged by securities firms for each transaction was fixed, regardless of the number of transactions. This pricing standard is more unfair to retail investors with relatively small transaction volumes and also limits the growth of retail investors' scale. 1975year5month1On the same day, the Securities Law was amended to allow securities firms to charge different commission rates to investors. This regulatory change has directly spawned a new group of low-priced securities firms, such as Jiaxing. They only provide trading intermediary services to investors and omit other services such as investment research. This streamlined approach allows them to provide core transaction services at a lower cost, reducing the average cost per transaction to50Around US dollars. The emergence of low-priced securities firms also creates competitive pressure on full service securities firms, forcing them to reduce their service fees20%about. 1990In the 1990s, the booming internet economy gave birth to a group of online trading platforms, such asETradeYingtou Securities, Demeli Securities, etc. These securities firms provide customers with trading systems based on internet platforms, greatly reducing manual order receiving costs and reducing the average cost of each transaction to20Below USD. At the same time, under the stimulation of private equity investment, these online securities firms can spend a lot of money on market promotion to seize the market share of traditional securities firms. For example,1998Year,ETradeRaised through SoftBank in the private equity market4Billion US dollars, and in the same year, a period of12Months, spending up to1A billion dollar marketing campaign. In the last century90In the late 1990s, the feast of the internet economy was celebrated by NASDAQ2000The collapse of the year ended abruptly, and many internet companies' stock prices plummeted, even going bankrupt. The depression in the secondary market quickly spread to the primary market, and emerging securities firms that lost the support of their investors were unable to continue to seize more market share by burning money. However, technological updates and the resulting disruptive pressure on the securities industry have not stagnated due to market fluctuations. here we are2010In the 1990s, a new generation of securities firms led by Robinson once again brought innovation to this industry. They mainly target35Young retail investors under the age of 18 receive very cheap commissions, starting with each order10Below US dollars, even without commission, customers were allowed to buy and sell stocks for free. From the brief history above, it is not difficult to see that the brokerage industry is charging lower and even free commissions, which is an irreversible historical trend. Collecting zero commission from clients also means that securities firms need to innovate their business models and generate revenue through other means to achieve profitability. Secondly, investment is becoming increasingly popular. Last century70In the 1990s, due to the average cost of a transaction being as high as100Above the US dollar, many middle class and below investors are unable to afford to speculate in stocks and are excluded from the stock market. This also means that for securities firms, the key to success lies in capturing high net worth and institutional clients. However, two changes in the securities industry have led to an increasing number of investors participating in trading. The first is the continuous decline in transaction costs mentioned above. The second is the "sporadic stock trading" services provided by some emerging securities firms. Before the implementation of sporadic stock trading services, the vast majority of investors were unable to afford expensive stocks. A typical example is Berkshire HathawayA。 Due to its high stock price30Many small and medium-sized retail investors are looking forward to stocks, even if they believe in value investing, they cannot become shareholders of Berkshire Hathaway. In order to meet the needs of these shareholders, Buffett has decided to issue Berkshire HathawayB, equivalent to Berkshire HathawayAStock price1/1500Allowing retail investors to purchase their company's stocks with limited funds. in ChinaAStocks also have similar contradictions. For example, the share price of Kweichow Moutai is as high as2000More RMB, buy a hand100Stocks, you need to20More than ten thousand RMB, exceeding the budget of many small shareholders. Sporadic stock trading can allow any investor to purchase one percent, one thousandth, or even smaller shares, and the problem of individual stock prices being too high is completely solved. The same logic also solves the transaction contradiction of Bitcoin. The current price of a Bitcoin exceeds5Ten thousand dollars is too expensive for many retail investors. However, sporadic trading systems are also suitable for Bitcoin, enabling more traders to participate. Thirdly, the socialization of investment. The increasing popularity of investment has led to a surge in the number of people participating in investment activities, and has also given rise to a larger investment community. Actually, this is alsoeTOROOne of the reasons for promoting community-based investment.eTOROFound that there are approximately70%The user registered a trading account but did not recharge it. Their main purpose of registering an account is to enter chat rooms and exchange opinions on stocks and investments with other investors. That is to say, in addition to investment needs, the market also has social needs for the services provided by securities firms. The social needs of investment are not new. Hedge funds of all sizes on Wall Street often organize gatherings or cocktail parties to exchange investment ideas. But such activities are limited to professionals in the investment industry and have a relatively high threshold for participation. With the explosive popularity of smartphones and social media, various online investment communities have emerged, and salon socializing for investment topics is no longer limited to a small number of practitioners. If the participants in these investment communities reach a certain scale, the energy they can generate cannot be underestimated.2021At the beginning of the year,RedditStock ForumWallStreetBetsIndividual investors in the game industry are working together to bring together game retailersGamestopThe stock price of20Push the US dollar up to around300Multiple dollars forced several large hedge funds that were short selling the stock to sell their positions, shocking Wall Street. Socialization of investment has also spawned a group of investment internet celebrities and bigV。 They may not necessarily have a background in a prestigious university or prominent work experience, but they have their own unique investment methods that can capture a group of fans who are closely following them.eTOROThe "one click copy" feature launched is mainly aimed at this group of users, allowing them to easily follow and submit to their recognized opinion leaders. stayeTOROA top internet celebrity who has done a good job in China, with tens of thousands of users joining in and managing a total of over1Billion US dollars has surpassed many professional fund managers.eTOROThe advertising slogan launched is:Trade like Steve, The meaning is that every user can invest in the stock market like Steve, an investor who has done a lot of homework, which shows the good intentions behind his efforts to promote social investment. Throughout history, similar to other industries, the securities industry has also been filled with technological innovation and competition. If we stick to the rules and rely on our old roots all year round, it will be difficult to maintain competitiveness and market share in the securities industry, which is sailing against the current and either advancing or retreating. From the historical trend, the commissions that securities firms can charge will become lower and even more will join the zero commission category. Therefore, securities firms that rely solely on commission income will find it increasingly difficult to live. In order to improve their competitiveness, securities firms need to constantly innovate, develop new products, or provide different services to meet customers of different age groups. The essence of market competition is survival of the fittest and survival of the fittest. Only by constantly ahead of the times and meeting future market demands can we ensure that we become an evergreen tree in the industry and not be subverted by new troublemakers. The author is Singapore Wufu CapitalCEO(This article only represents the author's viewpoint) |
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