As Charles Schwab exits Singapore, others take its place

Singapore

SINGAPORE remains an attractive destination for new brokerage entrants, with two such outfits setting up here even as US-focused discount broker Charles Schwab announced that it would cease operations in the city-state by year-end.

Interactive Brokers - known for its low-cost trading platform - received an approval-in-principle for a Monetary Authority of Singapore (MAS) Capital Markets Service licence in September.

Its Asia-Pacific managing director David Friedland told The Business Times he hopes the Nasdaq-listed broker will be given the go-ahead to commence operations in Singapore from January 2020.

"The reality is that Singapore is already an important global financial centre," Mr Friedland said.

Founded in 1978, Interactive Brokers is the US' largest electronic trading platform based on the number of daily average revenue trades.

Having first started operations in Hong Kong 25 years ago, it is no stranger to Asia. In fact, the brokerage first set its sights on Singapore over a decade back.

Mr Friedland recalled: "We first looked into getting a licence in Singapore more than 10 years ago but raised our priority for doing so over the past five years."

That said, he noted that Interactive Brokers' Singapore-based clientele has been growing through reverse marketing and word-of-mouth. While unable to disclose the size of its Singapore clientele, he said they tend to "be more sophisticated and/or active traders".

Its Singapore team currently has four staff, headed by Kevin Tan Kim Leng as chief executive officer but plans are in place to add a client service team, which Mr Friedland said "could double numbers quickly".

With the brokerage's flagship product IBKR PRO, clients - both retail and institutional - are able to trade securities including stocks, exchange- traded funds (ETFs), contract for difference derivatives (CFDs), among others, as well as foreign exchange across more than 125 markets in 31 countries.

Commissions are charged through either a tiered or fixed pricing scheme, with rates differing according to the geographies of the various markets.

With the race toward zero commission trading in the US heating up, Interactive Brokers this month launched IBKR Lite, where investors can engage in unlimited, commission-free trading in US exchange-listed stocks and ETFs. Trading in other securities are charged at a fixed rate.

Unlike IBKR PRO, trades placed on IBKR Lite are routed through market makers who pay Interactive Brokers for the order flow, instead of using its proprietary smart order router. IBKR Lite users also face less competitive interest rates on idle cash balances and for margin loans than IBKR PRO users.

At present, it is unclear if IBKR Lite will be offered to future clients in Singapore; the head office will decide in November, Mr Friedland said.

Meanwhile, Australian electronic trading platform Yieldbroker, which targets institutional investors, began operations here in August in its first foray into an overseas market. Yieldbroker operates an over-the-counter (OTC) interest rate exchange covering the primary, interdealer and dealer-to-client markets focusing on Australian dollar- and New Zealand dollar-denominated fixed income securities.

Meha Thind, Yieldbroker's Asia managing director, told BT: "Singapore is the key fixed income hub in Asia; opening an office represents an important strategic move in our growth."

She added that Yieldbroker received its operator licence from MAS on Sept 16 and is now actively marketing to prospective clients in Singapore and the region.

Yieldbroker was conceived by Australian banks in the late 1990s to move the issuance and trading of bonds and derivatives to an electronic platform. In 2014, the Australian Stock Exchange (ASX) acquired a 49 per cent stake in the fixed income broker.

Ms Thind said: "Our business focuses on efficiencies in collaboration with our sell-side partners, allowing us to offer lower transaction costs, and our sell-side pricing model offers decreasing transaction costs as activity increases."

The broker also provides insights for investors through its data business, which offers real-time, end of day (EOD), snap and historical data as well as various transaction and trading metrics and reports.

Ms Thind said: "We have many customers who source our data for various internal use cases, and are not necessarily active fixed income traders."

Yieldbroker currently has five dealers and six clients based in Singapore that include sovereign fund managers, global asset managers, global fixed income sell-side banks and local banks with regional reach.