Like concertgoers discovering new artists at a music festival, new investors are milling around stock markets across the world, trading information and trying to unearth stocks they like. And hoping to strike a chord with these users is Interactive Brokers.
“We’ve been surprised actually. Last year, the amount of volatility just exploded. We had people who were attracted by this volatility — like they heard good music — and they wanted to attend this concert, so they joined [us],” says Guillaume Roux-Chabert, head of sales at Interactive Brokers Singapore.
Trading against the backdrop of the Covid-19 pandemic, the new millionaire hopefuls are still cautious though. “They invested mainly in the usual, like Tesla and other US securities, with not too big of a size. It was more like, ‘Oh, I hear some good music; I’ll listen for a bit but I don’t want to get too involved,” adds Roux-Chabert in an interview with The Edge Singapore.
With time, these investors will place bigger bets, says Roux-Chabert, who joined the brokerage in October 2019. “You go through the learning curve: try a little, test the market, you learn. Once you get more comfortable, then you trade bigger [amounts].”
Interactive Brokers Singapore began operations here in July 2020, at the height of the pandemic. At its launch, more than 37% of Interactive Brokers’ users lived in Asia, up from 27% in 2017. “From July, we were tremendously successful, we were onboarding tens of thousands of new accounts, which was really over our expectations, actually,” says Roux-Chabert.
Headquartered in Connecticut, Interactive Brokers is the largest online brokerage firm in the US by the number of daily average revenue trades (DARTs).
For March 2021, the brokerage logged 2.99 million DARTs globally, 53% higher y-o-y. These trades were made from some 1.325 million client accounts around the world, a growth of 74% y-o-y and 5% m-o-m.
According to Roux-Chabert, Interactive Brokers Singapore has welcomed “a couple tens of thousands of new accounts” and that number is “increasing quickly”.
“Many millennials among the new users want to have access to as many markets as possible.” These new users are entering with bated breath and deep pockets. As of March 2021, Interactive Brokers saw client equity of US$330.6 billion ($438.4 billion), 106% higher than the year before and client margin loan balances of US$42.2 billion, 113% higher y-o-y. The average order size for stocks that month was 1,945 shares, with an average commission of US$1.61.
“There is also a life cycle for investors. You start with small amounts and use functions that are quite straightforward and simple within a mobile app. As you grow your capital, you become a bit more sophisticated with the quality and breadth of products that you want to trade,” he adds.
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Understanding consumer behaviour is comfortably in Roux-Chabert’s wheelhouse. He was formerly the head of e-commerce for Asia Pacific at Deutsche Bank, moving to Singapore for that role in 2014. Before that, he was last here in 2003, where he worked to digitise the trading floor at the Singapore Exchange.
According to Roux-Chabert, cryptocurrency trading is at the top of users’ wishlists, as well as that of the brokerage. “If you look at the CEO’s letter this year, he mentioned that crypto is one of the development targets for Interactive Brokers this year.”
Just like how the market is evolving, the firm is moving to offer what customers are starting to hanker after. In April, an Interactive Brokers spokesperson confirmed to Forbes that it has plans to offer Bitcoin trading to customers by the end of this summer.
That said, customers are also looking to protect their capital, he adds. “So, there is still a conservative approach to things, even though the technology is there ... When, and not if, Interactive Brokers does crypto, we will do it with maximum protection for our clients.”
The firm is aiming to expand its customer base in a big way. According to Roux-Chabert, there is a “large new mandate” for Interactive Brokers Singapore to onboard family offices, registered fund managers and advisors to their platform.
He highlights the Variable Capital Company (VCC), a new corporate structure for investment funds introduced on Jan 14, 2020, by the Accounting and Corporate Regulatory Authority (Acra) as a customer base of institutional investors. “We’ve onboarded over 30 VCCs [and] there are around 200 in Singapore.”
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The brokerage is also looking to expand its Singapore team, currently numbering 10 staff. “We will be hiring mainly for client servicing,” says Roux-Chabert.
Even with US$2.2 billion in net revenue for FY2020 and multiple firsts among its competitors, Interactive Brokers is staying abreast of changes in the stockbroking industry even half a world away from its headquarters.
“We are investing significant sums to keep the system at the forefront of technology,” says Roux-Chabert. “The idea is to be a giant without resting on our laurels.”
