The Futu-re is golden

China Daily (Canada) - - HONG KONG - By EMMA DAI in Hong Kong em­madai@chi­nadai­lyhk.com

Dis­sat­is­fac­tion with on­line bro­ker­age ser­vices in Hong Kong is lead­ing main­land IT ex­perts to eye the gold mine of out­bound in­vest­ment as they vow to change the game with smooth user ex­pe­ri­ence .

“The Shang­hai-Hong Kong Stock Con­nect is a very good op­por­tu­nity for us. Sud­denly a vast num­ber of main­land in­vestors re­al­ize there is a gold mine in the Hong Kong stock mar­ket. And once they understand the flex­i­bil­ity of di­rectly trad­ing with a Hong Kong ac­count, many would skip the Stock Con­nect, es­pe­cially given the con­ve­nient on­line trad­ing plat­forms we pro­vide,” Li Hua, founder and chair­man of Futu Se­cu­ri­ties In­ter­na­tional (Hong Kong) Ltd, told China Daily.

Futu Se­cu­ri­ties was founded in April 2012 and be­came a par­tic­i­pant in the Stock Ex­change of Hong Kong the same year. Then in Au­gust 2014, it be­came the real-time data in­for­ma­tion ven­dor of HKEx In­for­ma­tion Ser­vices Ltd, one among 187 world­wide.

Un­like a tra­di­tional bro­ker­age, Futu’s ser­vices are en­tirely Web-based, avail­able on per­sonal com­put­ers and var­i­ous mo­bile de­vices such as tablets and smart­phones, and across mul­ti­ple plat­forms in­clud­ing Win­dows, MAC, An­droid and iOS.

Through its app or desk­top soft­ware, in­vestors can mon­i­tor mar­ket move­ments of Hong Kong, the main­land and US-listed stocks. Thanks to its face-to-face cer­ti­fi­ca­tion process, as re­quired by the Se­cu­ri­ties and Fu­tures Com­mis­sion (SFC), main­land in­vestors are able to open Hong Kong eq­uity ac­counts with­out hav­ing to visit the city.

So far Futu has ac­cu­mu­lated over 500,000 reg­is­tered users, of whom more than 50,000 have car­ried out cer­ti­fi­ca­tion. So far, 500 main­land lo­ca­tions have been qual­i­fied to pro­vide such ser­vices. Even though it is a Hong Kong bro­ker, the ma­jor­ity of Futu’s user base is still on the main­land.

“Our seed users — mostly our friends and fam­i­lies — are main­land-based, and we be­lieve in word-of-mouth mar­ket­ing in­stead of mass-mar­ket ad­ver­tis­ing,” Li said. “That’s a more ac­cu­rate way to reach out to our tar­get cus­tomers — ev­ery eq­uity in­vestor has sev­eral friends trad­ing stocks. They will rec­om­mend us be­cause our tool is al­ways a bit bet­ter than the oth­ers. In fact 65 per­cent of our users come via rec­om­men­da­tion. This is also an au­then­tic way to con­duct on­line busi­ness.”

Li, the 38-year-old founder of Futu Se­cu­ri­ties, was the 18th mem­ber to join Ten­cent’s startup team and was gen­eral man­ager of the In­ter­net gi­ant’s in­no­va­tion cen­ter un­til 2008. Stunned by how back­ward on­line bro­ker­age ser­vices ap­peared to be in Hong Kong, and be­ing aware of main­land in­vestors’ over­whelm­ing de­mand for over­seas as­set al­lo­ca­tion, Li de­cided to build up Futu Se­cu­ri­ties with his cy­ber ex­pe­ri­ence and IT know-how.

“The big­gest dif­fer­ence be­tween this com­pany and other bro­kers is the In­ter­net gene we have. Our on­line tool is our key strength. Most Hong Kong bro­kers don’t op­ti­mize their on­line plat­forms be­cause of cost con­cerns. But we al­ways place user ex­pe­ri­ence be­fore profit,” Li said.

“For ex­am­ple, one time a color-blind client com­plained that he could not read can­dle­stick charts with both red and green bars in solid for­mat. In re­sponse, we changed the bars to solid and hol­low for­mats. The chances of en­coun­ter­ing such a case is prob­a­bly just one in a mil­lion. But that’s how much we care,” he said.

This June, Futu Se­cu­ri­ties raised $60 mil­lion in Se­ries B fundrais­ing from Ten­cent, as well as ven­ture cap­i­tal firms Ma­trix Part­ners China and Se­quoia Cap­i­tal. This fol­lowed the $10 mil­lion in­vest­ment in Se­ries A in March 2014 by the same group of in­vestors.

“This busi­ness is not burn­ing cash,” Li said. “But the in­vest­ment helps keep our liq­uid­ity flow­ing, so that both clients and the SFC feel com­fort­able with us.”

Li re­vealed that af­ter set­ting aside enough cash to meet reg­u­la­tory re­quire­ments, the next step is to add ca­pac­ity and keep ex­pand­ing.

“We are prob­a­bly the only bro­ker in Hong Kong whose server didn’t die dur­ing the mar­ket height and tur­moil ear­lier this year,” he said, adding that in June, the bro­ker­age’s monthly turnover ex­ceeded HK$20 bil­lion. “But as the busi­ness grows, we need to strengthen and ex­tend the ini­tial struc­ture to be pre­pared for an even larger scale of trade flows.”

In May last year, Futu Se­cu­ri­ties adopted Ten­cent’s cloud com­put­ing ser­vice, which al­lows au­to­matic ex­ten­sion to­ward ex­tra server ca­pac­ity in case of sud­den spikes in trade vol­ume.

“The fi­nan­cial in­dus­try re­quires a stable and re­li­able sys­tem, some­thing in which we are very ex­pe­ri­enced. Just imag­ine how much in­for­ma­tion Ten­cent han­dles ev­ery day. It’s way big­ger than the daily trad­ing flow of the Hong Kong stock mar­ket.”

Mean­while Futu also aims to pro­vide a “closed-loop” ex­pe­ri­ence to in­vestors, by de­vel­op­ing and con­nect­ing all the sys­tems them­selves — from trad­ing to clear­ing and cus­tomer in­for­ma­tion man­age­ment.

“It takes a tra­di­tional bro­ker­age at least sev­eral days to open an ac­count for a new client, be­cause in­ter­nally their sys­tems are not con­nected and back­stage in­for­ma­tion is still passed by hand,” Li said.

“With the abil­ity to de­velop and main­tain our own sys­tems, we can con­nect all the back­stage plat­forms and have the flex­i­bil­ity to of­fer treat­ments like waiv­ing trad­ing fees on the client’s birth­day, which a tra­di­tional bro­ker wouldn’t be able or care to do. Once that is achieved, the bar­rier of our busi­ness would be pretty high.”

Futu Se­cu­ri­ties claims an edge over tra­di­tional bro­ker­ages in that its ser­vices are mainly Web-based and for its ef­forts at be­spoke client han­dling.

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