Online access to stock market growing - But is it growing the market?
Published:Friday | January 31, 2020 | 12:15 AMNeville Graham - Business Reporter
The number of accounts hosted at the Jamaica Central Securities Depository, JCSD, for stock market investors jumped by more than 48,000 or 30 per cent, largely driven by new market entrants.
The numbers also topped 200,000 for the first time – moving from 157,854 to 206,004 at December 2019.
“It is not unusual, given the efforts being made at market education, the economic climate, and also the new investors being added with every IPO [initial public offering],” said Managing Director of the Jamaica Stock Exchange, Marlene Street Forrest. “With Wigton alone, over 11,000 new accounts were opened,” she said.
Moreover, the numbers actually cloak the real size of the investor community. Street Forrest said more than 76,000 of the 206,004 stock trading accounts held at JCSD were joint accounts with more than one investor.
Outside of the stock market, JCSD also hosts retail repo accounts, pushing the overarching number with stocks to 234,378, up from 199,145 in 2018.
Amid the growth in the market, the JSE and the broker community have been investing in technology to make it easier for investors to access the market and become active traders.
The investments are being made because online access serves to deepen the market. But while it seems that NCB Capital Market’s GoIPO platform was one of the drivers of the Wigton volume subscriptions, what is not clear is the precise impact of online trading overall on the growth of the investor community and trading volumes.
JSE introduced its online platform JTrader about five years ago. Street Forrest says the exchange cannot point to a direct correlation between the online trading platform and market activities, but that the anecdotal evidence, inclusive of viewpoints and stories, are pointing in that direction.
“We believe there is (a correlation) from the anecdotal reports and from the level of trading through the online trading portal. We also note that trading through this medium has significantly increased since 2015, when we just introduced the platform,” she said.
“Currently, eight of our 13 brokers are on board and we expect a few others, thus allowing more investors to trade online.”
Sagicor still on top
In 2015, when the Jamaica Stock Exchange was named the best market worldwide, stock trades for that year topped 5.4 billion units. And Sagicor Investments was cited as lead broker.
Last year, Sagicor was again named lead broker in a much more intense market, where 12.36 billion units traded throughout the year, but the brokerage house was not among those known to have sunk funds into platforms that allow their clients to trade online.
The brokers known to be investing in digital access to the market are NCBCap, Proven Investments, and Mayberry.
However, neither they nor the JSE have disclosed the level of investment made in their platforms.
Mayberry has an application that allows the user to check on stocks, give instructions to their broker, and purchase and sell shares. Recently, it added a new feature that will allow its clients to participate in initial public offerings. Mayberry was lead broker for the Wigton IPO, which was one of the largest market transactions in history, but its IPO subscription portal was not in place at the time.
Proven and NCBCap offer the same services, but their platforms were dedicated to IPOs from the beginning. NCB Capital Markets CEO Steven Gooden says they were the first to market in April 2019 with an IPO portal, which was launched ahead of the Wigton IPO.
It has since been upgraded.
“That has allowed us to make some headway in creating a platform that offers an end-to-end digital process, so there is greater convenience for the client. We are also the only platform connected directly to the stock exchange and now clients may open their investment accounts online which is automatically accompanied by a Jamaica Central Securities Depository account,” Gooden said of the GoIPO solution.
Proven launched its IPOPro recently, offering the same as GoIPO but with the added feature of allowing for joint accounts through paperless, digital sign-up.
“We see this as a way for Jamaicans to participate in the euphoria of IPOs happening in Jamaica, especially having the No. 1 stock exchange in the world. We want to increase the investor base by making that experience easier and more satisfying for investors,” said Selvin Mothersill, head of strategy and innovation at Proven.
In the past five years, JSE was twice adjudged the best performing stock market worldwide, in 2015 and 2018.
For Street Forrest, the proliferation of digital systems means more of what the JSE desires in order to stay on top – greater investor participation, more active trading, and greater benefits for investors.
“There is definitely a link because the ease of doing business, whether it is trading or other activities, tends to lead to more purchases. Apps and online trading platforms provide more information to investors, greater ease in entering and executing trades, less reliance on brokers, and now some brokers are charging less fees for execution of trades,” Street Forrest said.