Turning 10: A Look Back at the Origin Story of Brokers, Plus How IPOs, Equities, and Self-Directed Investing are Tracking

A Q&A with Greg Boland, Chief Strategy Officer, Tiger Brokers

Thursday, September 12th 2024, 5:40AM

Tiger Brokers globally has reached its 10 years in business milestone, how is the business tracking in New Zealand?

We now have about 2.3 million account holders globally, with client assets at an all-time high of US$38.2 billion at the end of Q2 2024. The company’s trading volume has also increased by 62.5% YoY to US$105.9 billion. In New Zealand we have Tiger Fintech (NZ) Ltd, which started to bring in Kiwi clients in April 2022 and is tracking extremely well as we share our platform advantages such as free in-depth quotes for US stocks, extended trading hours, and a rich options trading experience.

In New Zealand, our Q2 2024 total deposits were up 124% YoY, average first-time deposits up 188% YoY and the number of new trading accounts opened increased by 133% YoY.

Globally, after celebrating 10 years in June, in Q2 2024, the company's net asset inflow remained robust, reaching US$7 billion for the first half of the year.

Tell us about how Tiger was founded?

Tiger Brokers’ founder and CEO, Wu Tianhua, describes himself as “a typical 1980s science and tech guy.” He was introduced to the US stock market when he received stock options as a software engineer at NetEase Youdao, and he noticed that many trading platforms for US stocks were difficult to use, with cumbersome processes and poor user experiences. After trying multiple platforms and seeing no improvements despite many suggestions, he had the idea to create a truly user-friendly US stock brokerage.

Tianhua essentially crowd-funded Tiger Brokers as a start-up through his IT circle of friends, and Tiger initially entered the market through offering US stocks trading, a market inherently suitable for globalisation. Our flagship trading platform, Tiger Trade, was launched a decade ago; Tiger Brokers went public on Nasdaq in 2019 and expanded internationally, starting with Singapore in 2020. Now one-third of Singapore investors have utilised the Tiger Trade platform, and of course Tiger Fintech (NZ) Ltd started operations in New Zealand in 2022.

The flourishing of the US stock market in recent years has greatly benefited the business in acquiring clients and carving out our own identity in the brokerage landscape. By becoming an underwriter of many US and global IPOs, we've transitioned the IPO subscription process from offline to online, letting users in select jurisdictions subscribe to an IPO with just a few clicks. And the derivatives market associated with US stocks has created numerous investment opportunities.

The ability the Tiger platform, and other share trading platforms, gives people to self-direct their trading is amazing. Earlier in my career I would go and educate people on trading systems in London and New York and elsewhere, teaching them how to use the Australian systems because everything was separate. You would sit in a dealing room and the broker would have six different screens and six different systems to trade stocks in the New York, London, Australian, New Zealand markets, and so on. Now people can go on their phone or laptop to look at the markets and prices and trade there and then. It’s a remarkable change.

Where does Tiger Brokers NZ sit amongst other share trading platforms in NZ, how is it different?

There are a few ways we are different and, in our view, we offer clients an advantage. To help people find their way around and learn how to trade, we offer a demo platform which is unique. This enables people to open an account and put in some money – as little as a dollar or two – and look at the demo system, which has a pseudo amount of $100,000. You can use this ‘money’ to learn the philosophy of trading, how the system works, how to buy or sell, and how to cancel orders without any financial cost.

All that is significantly different to the other offerings in New Zealand.

Our system also links to our affiliate companies, so Tiger in New Zealand enables people living here to trade US shares. Because we're trading through our global partners, the cost of trading is lower. The three other main platforms in New Zealand all trade through the same system, whereas we can make changes and improvements very easily because we are using our wider company’s proprietary platform and we have control.

Most platforms in New Zealand offer local, Australian and US share trading, but we also offer access to the Singapore and Hong Kong markets, and ETFs for all those markets as well as derivatives. Futures products and options are particularly used by retail investors and about 24% of our retail investors in New Zealand trade US stock options, and 71% trade US stock. We also offer stock options in Hong Kong.

And people using our platform can trade on margin – so if you put in enough money to buy, say, one Apple or one Microsoft share, you can actually buy four Apple or Microsoft shares for the amount of money you put in. Being able to leverage one to four is significant compared to some of the other platforms.

We offer after-hours trading, and free live price data, while some others charge $10 or $14 per month for data, which can be a significant cost to clients over time, as well as access to TigerGPT which is a useful tool for investors to help them do their research on investment options.

The final point of comparison is that we are a one-stop shop. We have all the information about companies, shares, pricing history in our app and via our Group online forum, To The Moon, where people can discuss their experiences and read news reports about what is driving the Apple share price, for example – and about anything else that may inform their trading decisions.

You host regular investment seminars, what do you cover in these sessions?

Some of the sessions cover the how-to of using the trading app on your mobile or a desktop, and our website has information too. We cover the fundamentals of portfolio management, teaching people to think about what they're going to do when they trade and why they want to – the psychology of trading, how you would feel if you lost some of your money. We also teach trading strategies, which can vary from a long-term buy-and-hold strategy to short-term trading.

There is a lot of debate about diversification, which kinds of stocks should be bought and held. People often want to know about the likes of technology and AI stocks, which have done very well in the half-year but not so well in the last couple of months.

That’s a reminder that having a more diversified portfolio is often an advantage for a retail investor, and we discuss those aspects.

We also discuss and offer face-to-face training on the options market, which is new to many DIY investors locally. We cover the basics of what options are and how they work, and advanced options strategies for people who are further ahead. I was a teacher originally and then an education manager for both the New Zealand and Sydney Futures Exchanges, and I have done university lecturing on financial risk management and related topics, so I know a lot about stock options and how they work and I can deliver that information and education in an easy to grasp way.

Tiger is listed on Nasdaq and has underwritten several IPOs globally – what is your view on the opportunities for New Zealand companies looking at listing in New Zealand vs listing overseas?

Many people get to the stage in their businesses when they look to capitalise on their years of hard work. There are significant reasons to sell down your shareholding or to perhaps sell your whole company to others, and there's also the opportunity to list on markets. Listing on the NZX may be easier for smaller companies, and there is a higher threshold, in terms of the size of the entity, to list on the ASX, Nasdaq, or the New York Stock Exchange. And remember, a New Zealand company can list on multiple markets – many have started on the NZX and then listed on the ASX, and others have elected to go further to Nasdaq, the likes of Rocket Lab and Allbirds.

We’ve helped as an underwriter and a distributor for companies to list, because listing, especially offshore, is competitive. It’s a great opportunity and prestigious to be listed on an international market, and a valuable way for companies to raise capital and awareness in global markets about who they are and what they do.

What will falling interest rates mean for the equities market?

We saw a significant amount of volume go through the NZX in the hours immediately following the Reserve Bank’s announcement of the drop in the OCR in August. That was reflected in the market pricing in New Zealand, with the NZX 50 up by 2.9% in the afternoon. The interest rate decreases will have New Zealand investors looking at investing in equity, because bonds have reduced appeal as interest rates drop. From a portfolio management point of view, you would continue to own bonds but also look at assets such as equities and other types of commodities to get a good return.

An interesting phenomenon is when interest rates drop the bond values go up, so people tend to sell at that time and make a capital gain. And then they buy equities.

We've seen signalling from the US Federal Reserve that it will move to cut interest rates in the US – likely by at least a quarter of a percent at the September meeting, and the market thinks maybe by up to a hundred basis points by the end of the year.

Time will tell. This all has significant flow-on effects into equities. We've had reasonable sell-off in equities in July and August, but now people are seeing stability with these interest rate indications.

What volume of trades is Tiger Brokers doing in various markets?

In 2023, client trading volume reached US$294.2 billion globally. In New Zealand in Q1 2024, US stock options trading clients grew by 43% quarter-over-quarter, and US stock orders increased by 53% quarter-over-quarter.

In July 2024, the average individual trade size by New Zealand users on Tiger Trade was US$9,053. By way of comparison, the average on another local trading platform is several hundred dollars per trade. In the same month, twenty-four percent of our investors in New Zealand traded in US stock options, while 71% traded in US stocks.

Because we are trading through our related entity, our fees are lower than those of the other share trading platforms in New Zealand. We are able to adjust the fees to the market, so there can be a significant difference.

Disclaimer:
This information is not financial advice, and should not be regarded as a solicitation or recommendation to acquire or dispose of any financial products. Options trading carries a high level of risk and may not be suitable for all investors. Any third party's content referred to has not been assessed nor is endorsed by Tiger. Before making any investment decisions, you must consider the appropriateness of doing so in regard to your own objectives, financial situation and needs, and consult your financial adviser. Past performance of financial products is not a reliable indicator of future performance. Tiger Fintech (NZ) Limited and any of its directors, employees and associates may, from time to time, deal in any financial products mentioned (or derivatives of them), as principal or as agent for clients and may earn brokerage, fees, salary, bonus or other benefits for those dealings.

Tags: Tiger