Singapore startup unveils Asia's first robot trader for retail investors
Singapore
EVEN before the disruption dust kicked up by robo-advisers has settled, a Singapore-based startup has developed investment robots that can work out trading and investment strategies and execute them on behalf of users.
In what is believed to be a first for retail investors in Asia, AlgoMerchant, started in 2015, is offering six robot creations - each with a different trading philosophy - that invest in the Singapore, Hong Kong and US stock markets, The Business Times has learnt.
Notably, these investment robots take things one big step further than robo-advisers, which use algorithms to provide financial advice to clients and have grown in popularity since the 2008 Financial Crisis.
Robo-investing, on the other hand, does not involve dishing out advice but instead implement their own mandate and users can choose to follow the signals from the robots, AlgoMerchant chief Justin Tjoa said in an exclusive interview with BT ahead of the official public launch of the robots on Saturday.
He said: "We aim to disrupt the industry by enhancing retail participation and confidence in the capital market in Singapore and the region, as well as making the stock market here more liquid and efficient."
Mr Tjoa added that the robots - which are trading programs rather than physical robots per se - aim to help retail investors "beat the market" by using data analytics and machine learning. AlgoMerchant will identify algorithms built by third-party quants or mathematics experts, before validating, refining and integrating them into their robots.
"The decision making behind these robots are based on quantitative and data-driven techniques. It means that the robots apply mathematical models on various datasets to make buy or sell decisions and execute them automatically."
BT understands AlgoMerchant has not applied for any licence under the Monetary Authority of Singapore (MAS). Mr Tjoa said the startup's lawyers believe its business model - which provides robo-investing software as a service but not fund management services - does not fall under regulated activities.
An MAS spokesman said: "MAS supports the use of technology to promote innovation in financial services. Whether a company requires a licence from MAS depends on the business model and the specific activities conducted or services provided."
For instance, a company carrying out securities dealing or fund management will need a capital markets services licence, while a company conducting financial advisory activities will need a financial adviser's licence.
The MAS spokesman added: "In June 2017, MAS released a consultation paper on proposals to facilitate the provision of digital advisory services in Singapore and is currently reviewing the feedback received."
On the costs of the robots, Mr Tjoa said it will cost about S$100 a month to use the services of an AlgoMerchant robot. Users can pay an additional S$50 a month to have the robot automatically trade for them on two supported brokerages: IG Markets and Interactive Brokers. Users can also retain their existing brokerages and manually mimic the trading decisions of their robot at no extra cost.
The decision on which robots to use lies entirely with investors, depending on their risk profiles.
Paladin, for instance, is a robot designed for investing in the Singapore stock market, and adopts a medium- to long-term investing approach. Orion, another robot, is developed for the US stock market with a focus on profitability, said Mr Tjoa.
Two other robots have been modelled after "celebrity traders" in Singapore.
Heng Xing, a day-trading programme, is developed based on the trading strategies of Robin Ho. The latter made more than 2,000 per cent in returns during the 2008 financial crisis and is a regular speaker for the Societe Generale Daily Leverage Certificate programme, said Mr Tjoa.
The other, C Algo, is a trend-following programme built on the trading ideas of former remisier Colin Seow, who authored The Systematic Trader and was featured in Secrets of Highly Profitable Traders.
The robots have an average projected annual return of over 20 per cent, said Mr Tjoa. "There are patterns in the markets that can be exploited to make higher returns than the markets and with lower risk. However, the markets are complex, and we need to discover such knowledge by mining from various huge data sets.
"With our solution, retail investors can be on the same level playing field with professionals. And in the long run, robots will fare much better than human traders."
Mr Tjoa said AlgoMerchant's ultimate goal is to help retail investors invest and profit from the capital market. "Our goal is not just to be a software provider but a one-stop solution provider that utilises technology and creativity to solve challenges faced by retail investors."
AlgoMerchant earlier this month announced that it has raised over US$2 million in funding from East Ventures and individuals in the fund management and broking industry. The fintech startup was part of NTUitive, the startup incubator programme of Nanyang Technology University.
