Online investors could be forgiven for thinking that South Africa has somehow lost its map to the wild side of the Web.
Our online trading offerings seem a far cry from images from the United States of frenzied day-traders; of airless offices crammed with highly strung punters and strong body odour; and of amateurs signing away their savings as they watch the dealing screen ticking away before their eyes. And if South Africa appears to have lost the road map to the Internet adrenaline rush, it’s almost unaware that wireless technology has long replaced the 15-inch monitor.
The US would have you believe it is the norm that 11-year-olds are managing their parents’ life-savings from the playground. But any South African who has flirted with online trading would surely concur that the experience is largely devoid of any front-line experience or adrenaline rush.
Online brokerages are primarily extensive research databases with varying degrees of sophistication. They offer a wealth of information that allows investors to become actively involved in the management of their portfolios. This has left the online trading experience as one of information gathering, analysis and decision making all, of course, the ingredients that make a wise investor.
But is this the total experience of online trading on offer? Because, quite frankly, this is dull.
Well the answer is no. Not any more. We have simply taken a long time in getting there.
The Johannesburg Stock Exchange (JSE) has, to a large extent, been both the inhibitor and driver in bringing its players on board into a more immediate trading reality.
The local market took a step in May when, after close to a year’s delay, the JSE launched its application programming interface (API). API is a messaging standard that allows a broker to access the JSE’s electronic trading system (JET) directly. Before the API system was launched the JSE did not allow online members electronic access to JET.
This meant that online brokerages would receive an order from a client and then have to manually capture this information on to the JSE’s trading books. This is a process brokers refer disparagingly to as an “air gap”. API allows brokers both traditional and online to connect directly with JET. Tradek head Paul Theron describes the interface as nothing less than a breakthrough in breathing life into online trading. The new system eliminates the manual capture phase of the process of logging a trade.
An online brokerage will still validate the buy or sell order by checking that the clients have the funds in their account, or that they actually do own the share. Once this has been done the order will be placed straight into JET without the broker having to go through the process of recapturing the information. No air gap saving the broker the cost of recapture and considerable time. And online investors can expect to have their trade registered in the JET order book about eight seconds after placing the order.
API is also cutting brokers’ costs. They pay a single connection fee of R1?000 a month for access to API. And the information can be accessed on any number of terminals. This is far cheaper than the previous Marketworks system where brokerages paid a R1?350 fee to connect to the system and then an additional R200 connection fee for each terminal.
API also allows brokers to customise the software they use to interface with JET. For the brokerages this means they can buy sophisticated software that will allow program trading whereby the software itself will analyse the market movements and make and execute buy or sell orders.
The JSE currently has 36 members signed on to the API interface. So API is great news for brokerages, but is this going to put adrenaline into the investor’s online trading experience?
The API interface allows online brokerages to buy software that can give their clients access to the same trading screen that dealers would see.
One of the software packages on offer is Livewire developed by Peregrine. Livewire gives clients a dealing screen with a live price feed and trades are logged directly on to the interface. This compares to other online trading tools in that the prices are live while others vary in delay time.
Again, the trade would require a quick verification by the brokerage before being logged and reflected back in the client’s account within seconds. The process is called straight-through processing. Better known as day-trading.
The experience is exciting for users as they see the entire process unfolding before their eyes. And that’s as real-time as you are going to get. But in a strange twist of fate, now that the JSE is finally moving with the times, South African investors are proving a little less able to adapt to change.
Theron says Tradek has about 250 clients using its Livewire software. That’s out of a total client base of 40 000. And Theron described other new technology offerings such as SMS alert messaging and WAP trading as “fairly experimental at this stage”. These two facilities take another step in removing the degrees of separation between and investors and their money.
Wireless technology (WAP) allows an investor to browse the Internet on a cellphone handset without being office-bound. Theron says clients using WAP facilities are just in the double digits, and that even fewer use that channel to effect a trade. More widely used is an SMS alert service where the online brokerage sends an SMS to your cellphone if a share in your portfolio breaches a certain floor or ceiling price.
So is South Africa’s future wireless? Not yet.
Online trading: A resources guide
U-Trade (Appleton Securities) (www.utrade.co.za) offers realtime price feeds to subscribers. Payment for live prices are R75. It allows you to set up multiple share-watch lists with live share prices, market depth, live price-earnings ratio, previous price and movement — all fairly standard tools. Brokerage fee is 0,35% and there is a facility to open a free 14-day trial account
E*Trade (www.etrade.co.za) is a United States-based Internet broker which launched in South Africa in October. The site is very user-friendly and offers a comprehensive guided tour of site and services. Live quotes and research are for members only. Trades from R100.
Tradek (www.tradek.com) offers registered members free live prices. For day traders there’s the Livewire/PIPS dynamic live price tool. This costs R199 a month. All trades of amounts below R13 333 cost R100 plus R17 tax. Bigger trades cost 0,75% of the value of the deal.
Interactive Investor International (www.iii.co.za) started as a comprehensive financial news and information centre but plans to offer online trading soon. Top-notch local content and analysis. It currently offers registered users share prices — 30 minutes delayed.
Moneymax (www.moneymax.co.za) is perhaps the most information-rich site on offer. It also offers a day-trading facility called Marketwatch, which can be downloaded and used at a cost. Marketwatch offers various price strata starting with real-time market updates moving to longer delays. This is the basis of the trading services on the new Icanon line.co.za
BFA-Net‘s site is administered by Moneymax. Both websites are owned by McGregor-BFA. It offers live online futures trading. BFA-Net’s strength is its extensive searchable research database. The website also has very useful company information sections like ‘who owns what” and ‘who runs what”.
Netassets — I-Net Bridge (www.netassets. co.za) is the personal finance and news website of I-Net Bridge. It offers portfolio management tools including a system of using a telephone. Netassets does not offer a trading system and you still need to trade through a broker.
Standard Bank Online Share Trading (managed by Standard Equities) (www.standardbank.co.za) This is the only bank with an online trading offering. Two hundred free live stock quotes are available a month plus 100 free live stock quotes a deal executed. Excess live stock quotes are charged at 5c a quote. Live portfolio updates are charged at 19c an update.