Tokyo FinTech
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Tokyo FinTech

Monex turns to Asset Management amidst Zero-Fee Trading

Facing a zero-commission competition for online trading of stocks and ETF by its biggest competitors in the US, where its TradeStation subsidiary is based, as well as the long-announced intention by SBI Holdings’ Kitao-san to bring zero-fee trading to Japan, Oki Matsumoto announced at the FY2019 results presentation that he will pivot Monex Group into an asset management-focused company.

Industry Forces

FinTech startup Robinhood, founded in 2013 in Menlo Park, California, launched it zero-fee trading app in March 2015. The firm quickly became popular among Millennials, and within a mere three years, Robinhood reportedly had as many accounts as stalwart E-Trade.

Notwithstanding significant system outages in early March 2020, when Robinhood was offline for the full trading while the Dow had its largest point gain in history (plus other system instabilities and additional downtime a few days later), and associated lawsuits, the company raised USD 280m in May at a valuation of USD 8.3bn, led by Sequoia Capital.

The competitive situation got more severe when industry stalwart Charles Schwab, whose launch in 1971 brought on the era of low-cost brokers, started offering free online trading of stocks and ETF in October 2019, leading initially to falls in stock prices for all online brokers between 15% and 30%.

In November 2019, Schwab then announced a merger with TD Ameritrade. “You basically pulled the rug out from under your competitors and then swooped in to pick up your healthiest competitor. It’s bigger than ETrade. They were looking for a CEO so this solves the issue. There was a succession issue at Ameritrade,” said Don Bilson, head of events driven research at Gordon Haskett.

In Japan, SBI Holdings has announced a three-step plan to introduce zero-fee trading across SBI Securities and Neo-Moba Securities, which would reduce the contribution of commissions to operating income below 5%. In the first stage, implemented in December 2019, SBI Securities started to offer zero-fee mutual funds sales, zero-fee ETF and REIT margin trading and substantially reduced night-time PTS and domestic/US ETF trading commissions.

Stage 2 will introduce zero-fee stock trading on Neo-Moba Securities, and Stage 3 commission-free spot and margin trading at SBI Securities. SBI Holdings states that these two stages “will be promoted upon the progression of commission-free trading at existing securities companies, and the new entrance of non-financial and foreign companies.”

Monex’s Pivot

Monex Group started its business overview during the recent FY2019 results presentation with the statement: “Launch of the Monex Activist Fund to shift to an asset management model.” As the first steps towards that goal, …

  • Monex-Saison-Vanguard was renamed as Monex Asset Management which will become a wholly-owned subsidiary of Monex Group as its core company for transforming itself to an asset-management model
  • The fund started investments to seek for corporates’ growth in Japan
  • The formation of the fund was completed within the Monex Group structure; the fund will both enlighten individual investors on the activism as well as execute the engagement to the companies invested

The Monex Activist Fund has started investments in April and will offer publicly offered investment trusts to individual investors in June.

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Norbert Gehrke

Norbert Gehrke

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Passionate about strategy & innovation across Asia. At home in Japan. Connector of people & ideas.