OCBC throws wrench in iFast's stockbroking plans

Singapore

ONLINE investment products retailer iFast Corp learned on Friday that if it wants to use a Singapore stockbroker's services to attack that stockbroker's bread-and-butter business, it should expect a fight.

iFast's new FSMOne platform hit a snag on Friday when counterparty OCBC Securities inexplicably stopped providing a connection to the Singapore Exchange (SGX). That disconnection came one day after iFast introduced a stockbroking service that allowed users to trade Singapore-listed shares and exchange traded funds (ETFs) at relatively low commissions.

It seemed clear to iFast why OCBC Securities pulled the plug.

"In my opinion, they are afraid of competition to their retail base," iFast chairman and chief executive Lim Chung Chun said.

In a statement, OCBC Bank said: "We execute trades on behalf of institutional clients - including asset management firms and investment funds - that function as financial intermediaries. We are able to provide such an arrangement if the intermediary's business model does not involve offering services identical to those we provide our customers. Enabling retail investors to perform trades through our online platform and our trading representatives is a core service we offer customers and a key business for us."

iFast is not a member of the SGX or the clearing house. It therefore needs to go through a licensed firm such as OCBC Securities in order to execute trades.

OCBC charges iFast an institutional rate, which would give iFast some room for a profit margin. But even then, iFast is offering exceptionally low commissions for its securities service - 0.12 per cent of a stock trade and 0.08 per cent of an ETF transaction, subject to a minimum S$10 charge for Singapore.

Most broking houses in Singapore charge about S$25 per transaction.

BT understands that iFast has used OCBC Securities for a while, but until this week iFast mostly serviced other institutional or business clients. That changed on Thursday with the introduction of the equity securities services. iFast, which has its own securities firm in Hong Kong, continues to offer stock and ETF trading in that territory.

It might be difficult for iFast to find another counterparty willing to offer it institutional rates, since that counterparty would face the same commercial conundrum that OCBC has experienced. Whether iFast can force or negotiate a resumption with OCBC remains to be seen.

In the meantime, iFast is applying to become an SGX trading member, which would allow it to trade directly.

"It will be a matter of time before FSMOne resumes the availability of SGX stock and ETF trading to customers," an iFast spokesman said.

This is not the first time that iFast has rankled incumbents in an industry.

In March this year, the Competition Commission of Singapore fined 10 financial advisory firms S$1 million for forcing iFast to withdraw its offer of a 50 per cent commission rebate on life insurance products.