Brokers count gains of online shares trading

A broker trades at the NSE. Total investor wealth at the bourse rose by Sh518.85 billion during the first three quarters of the year to stand at Sh1.79 trillion. FILE 

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By CHARLES MWANIKI,

In Summary

• Platform helps investment banks cut costs, grow their commissions.

Stockbrokers are banking on increased business from online share trading platforms as they fight to grow earnings and market shares.

Brokers say online platforms have helped cut costs significantly, which alongside the rise in brokerage commissions saw industry earnings increase significantly in the first half of the year compared to a similar period in 2012.

Stockbrokers on average realised gains of nearly 70 per cent on brokerage commissions in the half-year to June 2013, compared to a similar period in 2012, while employee costs went up only by an average of three per cent.

Running an online share trading platform has helped SBG Securities (formerly CfC Financial Services) and others cut costs significantly, the company’s chief executive Nkoregamba Mwebesa said.

“We can attribute our 2013 half-year financial results to efficient cost management which partly resulted from the introduction of an online share trading platform. Operating a branch network is quite expensive and by introducing online share trading we have managed to bring down our operating costs remarkably,” said Mr Mwebesa. 

The firm saw a 176 per cent rise in brokerage commissions in the first half of the year, helping increase net profit from Sh23 million in June 2012 to Sh76 million as at June this year.

AIB Capital chief executive Paul Mwai said that the system will boost earnings by encouraging more people to participate in the market, without the inconvenience of having to physically make their orders at broker offices.

AIB, which he said has around 2,000 clients trading on the mobile platform, joined other industry players such as Dyer and Blair, SBG Securities, Standard Investment Bank, Faida Investment Bank and Suntra Investments in offering the services.

“The service has attracted customers because with the online platform there is security of the portfolio, as a customer can view the account on demand,” he said.

“It also enables the people in the diaspora to participate in trading in the local markets,” said Mr Mwai.

With an online platform, customers can make transactions, check their current stockholding and cash balances, obtain the latest stock market quotes, and view the latest market news and historical data.

Clients also have real-time access to various reports including portfolio valuations, transaction statements, margin reports, contract notes, and stockholding reports.

(READ: Stock market trading to go online)

Mr Mwai said however that the online trading platform, that is popular with younger investors, needs to be marketed more to the older generation, whose investment capital forms a larger pool.

The Nairobi Securities Exchange (NSE) is already upgrading its systems to enable investors directly trade their shares via the Internet, once the draft regulations made by the Capital Markets Authority (CMA) governing internet trading are gazetted.

According to the NSE, the online trading functionality is embedded within the Broker Back Office System which has been adopted by 16 trading participants. Different firms are at different stages of test driving this module.