Online trading trends shift
• Mobile device use up, and there’s increased appetite for offshore markets, writes Lynette Dicey
The Covid-19 pandemic accelerated digital innovation and adoption across multiple industries.
This period also coincided with unprecedented market volatility which drove a surge in online share trading platform adoption as retail investors with time on their hands during enforced lockdown periods and disposable income looked to exploit opportunities available.
SA has seen a significant growth in online trading platforms in recent years, growth which has been fuelled by increased interest in do-ityourself or self-service share trading. According to the Top Securities Brokers survey, an annual survey conducted by specialist financial capital markets research house Intellidex, most firms offer comprehensive educational support and research, including both basic trading concepts as well as more sophisticated derivatives-linked investment options, ensuring DIY investors are well catered for.
Online share trading platforms have ensured that trading has become significantly more accessible for retail or DIY investors. The platforms, typically accessed via webbased portals or smartphone apps, generally require small minimums and charge low fees. This attractive value proposition has spurred on exponential increases in adoption.
Among the most noticeable trends in online share trading in recent years has been a migration from desktop to mobile use, says Shaun Murison, a senior market analyst at IG, an over-thecounter derivative provider.
“Clients are increasingly using their mobile devices to source and analyse market data as well as execute their trades,” he says. “Online brokers such as IG are now leaning to advance trading technology, tools and information previously only available from a broker or laptop service to mobile device.”
Conceding that this is challenging as mobile devices offer less retail space due to their smaller screens than a computer would, Murison says that significantly more than half of IG s client transactions are now done via a mobile device.
Another trend he has noticed is an increased appetite for offshore markets which afford lower costs, a broader range of markets and increased liquidity, particularly as barriers towards funding offshore accounts has lessened over the years, and Reserve Bank tax exempt thresholds have improved.
One of the attractions of offshore investments, he adds, is by providing an opportunity for currency hedging which is essentially a way of protecting against depreciation in our domestic currency. IG has approval from the Reserve Bank to offer card services for offshore funding as part of an individual’s single discretionary allowance.
As online share trading platforms compete for trader attention, Dineo Tsamela, client engagement lead at Standard Bank Online Share Trading, says it’s not the next best product that will capture the attention of traders but rather how well traders are serviced, empowered with education and able to create real value.
Meme stocks — stocks that capture the attention of an online audience, typically younger investors, on forums such as Reddit — have changed the way people invest.
“While hedge funds model for a certain position, no one models for what retail investors will do as the examples of GameStop and Robin Hood clearly illustrated,” says Tsamela.
A meme stock’s price is typically driven by its popularity on social media rather than business performance. GameStop’s share price rose more than 760% in 2021 after a group of investors on a Reddit channel decided to short squeeze Wall Street hedge funds.
“What the GameStop saga clearly proved is that retail investors have more power than ever before: they have access to information and online communities. The challenge, however, is that they’re accessing both authentic and legitimate advice as well as illegitimate advice which can result in investors getting burnt if the buzz gets out of hand. In the case of GameStop, for example, retail investors suffered heavy losses after the stock crashed,” says Tsamela.
To avoid being caught up in the buzz of meme stocks, she advises that investors rather adopt a deliberate and informed approach, and for that they need to be educated.
Tsamela believes that although online share trading has become much more accessible, still more could be done to make it even easier to open an online trading account.
While the South African online share trading industry is not yet at the point where it can offer fee-free trading, Tsamela believes local brokerages do offer competitive fees.
“The local market has yet to achieve critical mass and scale and will take time to mature to the extent that more developed markets have. In the meantime, we’re learning from their mistakes,” she says.