Wednesday 6th November 2019
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The entrance of micro-investment platform Sharesies to direct NZX share trading helped more than double volumes on the exchange last month.
Share trading had already been on the rise in recent months due to a new pricing regime and rules that encouraged brokers to transact on market, with the number of equity transactions up 70 percent in the nine months through September compared to a year earlier.
The NZX's October monthly metrics showed another step up in activity with 561,997 trades completed, a 110.2 percent gain from October 2018.
Benjamin Phillips, NZX executive director of markets development and clearing, said the increase was mainly due to the new pricing and tighter criteria for crossings - where a broker matches separate buy and sell orders - and also more trading being done on-market.
"Moving away from the fixed $1.31-a-side trade cost to the basis points model - so there’s no disincentive to trade smaller amounts - has seen more direct-to-market electronic order flow activity," he said. "This change also supported Sharesies coming on - whose model is around small retail values. They’ve certainly had an impact there."
Sharesies enabled its now 70,000 users to start investing directly in NZX-listed stocks in mid-July and now facilitates about 5,000 trades a day. In October, its platform accounted for about 125,000 transactions.
Leighton Roberts, Sharesies co-founder and chief of operations and opportunities, said the industry had recognised that there was a place for something like Sharesies to get people interested in investing earlier, and that it created opportunities for the wider market, not just itself.
"We're really clear on what we offer and how that proposition is different to the other brokers. You don't get the hand-held personal experience over the phone and we probably sacrifice a little control," he said.
"We are building out that part of it, but at the moment it's a pretty basic proposition. It achieves the needs of people who want to invest in the longer term in New Zealand companies and funds."
Roberts pushed back on suggestions that the platform was largely being used to push penny stocks on unsuspecting investors, saying education had always been a key part of the business through investment clubs and online forums.
"If you look at our numbers, most people are in the big, well-known brands or ETFs. We're working really hard to make sure people understand."
The average value traded was $220, and Roberts said people had gained confidence in the platform and started to make larger value investments through Sharesies.
Sharesies charges significantly less than other DIY broking platforms, with no minimum charge and a 0.5 percent fee for orders up to $3,000, and 0.1 percent above that. On the average value traded, that would be a $1.10 broking fee compared to the $15 that the likes of ASB Securities would charge.
NZX has placed a greater emphasis on reviving activity on the exchange. Over the past couple of years, it has updated governance and listing rules, changed prices and aligned disclosure obligations with those in Australia.
In September, an independent review of the nation's capital markets made 42 recommendations to support those efforts, name-checking Sharesies as one of several new platforms opening up investment to a broader population.
While the level of activity has soared over the past year, the value traded was up a more modest 2.1 percent at $3.07 billion last month. The average on-market trade in October fell to $3,350, down about 40 percent from a year earlier.
That trend has been consistent through the year, with the NZX metrics showing year-to-date trading on the debt and equity markets up 41 percent at 3.8 million transactions while values fell 4.9 percent to $30.96 billion. Of that, 53.3 percent of the value of transactions was traded on-market.
NZX shares last traded at $1.26 and have gained about 25 percent so far this year.
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