Targeting active-day traders who want a real-time gateway to a variety of U.S. stock execution destinations, MidasTrade.com is preparing for a late April launch of its direct-access trading platform in Korea. MidasTrade.com has already signed an agreement with Leading Investment and Securities, a Seoul, Korea-based broker/dealer, and plans to tap into the individual investor community by forging relationships with multiple Korean brokerage firms.
Brad Ecenkweiler, president of MidasTrade.com, says that the vendor hopes to attract Korean broker/dealers by offering them a highly customizable direct-access application. Through MidasTrade.com's direct-access front end, he notes, individual investor clients of Korean broker/dealers will be able to electronically route orders to Nasdaq's SuperSoes network, the New York Stock Exchange's SuperDOT trading engine and multiple electronic communications networks -- including Island, Instinet, Archipelago and Redibook. Moreover, he says, any Korean broker/dealer can private label MidasTrade.com's software, and offer the front end to its clients as its own.
Leading Investment and Securities, says Eckenweiler, has a customer base that includes roughly 1,000 online individual investors. Lots of other Korean brokers, he says, are interested in MidasTrade.com's direct-access platform, but are taking more of a "wait-and-see" approach -- in part because they are hesitant to offer their customers discount brokerage commissions for trading U.S. stocks. "Today, the (Korean brokers) are getting pretty significant commissions for off-shore (stock) purchases," Eckenweiler notes.
Eventually, however, as individual investor demand for direct access to U.S. equity markets increases in Korea, MidasTrade.com expects several Korean broker/dealers to follow in the footsteps of Leading Investment and Securities. Eckenweiler says that there are currently around 700,000 "hyperactive" traders in Korea -- active day traders between seven and 10 times a day. And many investors in that group, he says, want the ability to electronically trade Nasdaq stocks. "Nasdaq does not have the restrictions that the Korean market does, (such as) the ceilings and the floors. And, obviously, there is a lot more volume and a lot more liquidity in the Nasdaq market," he says.
Since hyperactive traders "make up a significant amount of the volume within the brokerage community," Eckenweiler adds, broker/dealers that choose not to adopt a direct-access system are going to be taking a chance on alienating their customers. "If only one or two brokers are offering this relatively inexpensive, online, real-time execution, the other brokers are going to have to compete with it at some time, or (risk) losing clients," he theorizes.
MidasTrade.com is not entering into the Korean investment community blindly. A while back, says Eckenweiler, the vendor forged an exclusive licensing agreement with Korea Computer Network Automation -- a financial software vendor that has sold its trading applications to more than one million online investors in South Korea. Basically, that deal gave MidasTrade.com the software rights to KCNA's so-called Client Automation tool outside of Korea. "If the CAT tool is used outside of Korea, we have the rights to it," says Eckenweiler. "For example, if CAT is used in future trades from Korea to the United States, we own the rights to that."
MidasTrade.com expects to provide very speedy executions to Korean investors. In tests, says Eckenweiler, MidasTrade.com has performed round-trip execution -- from a Korean terminal to a U.S. execution destination and back -- in six-tenths of a millisecond. In its first full year of operation in Korea, MidasTrade.com also expects to experience rapid growth. "Our target in the first 12 months is going to be (perform) somewhere around 200 million trades in a year," he says.