Online Trading Goes through the roof, Look at Popular AU Online Brokerage Providers

The domestic stock market had a strong footing just before the COVID-19 pandemic took the world by surprise. As a proactive measure, policymakers around the globe have been forced to take unprecedented actions to enforce social distancing measures, such as closing borders and stay at home.

The markets across the world collapsed like a pack of cards and more surprisingly post the crash, the markets swiftly rose like a phoenix. Amidst this turmoil, retail investors preferred trading in large numbers, with factors like stay at home orders leaving people with ample time. Consequently, there has been significant growth in trading activity across stock markets, especially the Australian Stock Exchange (ASX).

With a greater number of retail investors actively participating in the market, role of brokers in ensuring smooth and efficient trading cannot be stressed enough. The online brokers have come off age and are now ready to cater to the needs of modern traders who are tech savvy and desire seamless trading experience.

Before we look at some of the brokers who are providing key features such as low brokerage, excellent platforms, and modern trading tools to the modern-day trader/investor, let us quickly look at the history of online trading.

In this article, we will provide a general overview of the key players available in the AU online brokerage market.

Going back in time

As computers increasingly became mainstream in industries, transactions in securities market exchanges between market participants transitioned to electronic trading platforms in the early 1970s. The initial systems embarked an efficient flow of order information between brokers and stock exchanges.

National Association of Securities Dealers (NASD) transitioned to the world’s first electronic stock market from an electronic display of ticker information. As a result, NASD became the National Association of Securities Dealers Automated Quotations (NASDAQ), which, continues to be the preferred listing exchange for tech-based companies.

By the end of the 20^th century, online web trading grew popular, and information flow between market participants had improved significantly. Now, there are many firms offering web trading services.  

In Australia, the Australian Securities Exchange (ASX) launched Stock Exchange Automated Trading System (SEATS) in 1987. Within a few years, Sydney Futures Exchange (SFE), which later merged with ASX Group, introduced the world’s first after-hours e-trading platform called SYCOM.

Online Broking

E-broking wave gained momentum among market participants at the beginning of this century. Now the broking industry is more sophisticated than it was two decades ago. Internet penetration is perhaps at the highest level ever, e-broking companies are now providing a great deal of accessibility to customer and prospective customers.

Over the years, web broking players have evolved to new heights and standards with zero-commission wave already into play in some countries. They are now offering mobile-broking services through high-performance applications for mobile phones, providing a great deal of accessibility to prospective investors.

The significance of online broking is also reflected by a merger transaction being undertaken by Morgan Stanley, which is acquiring E*TRADE Financial Corp – a leading online broker who has stood firm over the decades across market and business cycles.

Salient features of a modern-day broker

March ASX volume Spike Turns Dotcom burst, GFC & European Crisis to Dust

March 2020 would go down as a historic month in terms of trading volumes, with 7 million trades registered in CHESS on 13 March 2020, which is 2x the pre-COVID-19 peak set in August 2019. This was a significantly larger volume spike than what the market had experienced till date, in fact, in both absolute numbers and percentage terms, the numbers surpassed the dotcom burst, GFC, and the European debt crisis.

Under such heightened activities, as validated by ASX data published in August 2020, the support of a good online broker becomes paramount. Let us look at some of the exemplary online brokers operating in the Australian market.

Which broker should be appropriate?

It depends as per your needs. A full-service broker like Bell Direct, NAB trade or CommSec might provide the user with research services but are relatively expensive than broking service providers available in the market.

Full-service brokers could be expensive than other brokers in the market because of additional services rendered. Internet and discount brokers provide relatively fewer services than full-service brokers.

Discount-brokers are appropriate when an investor has all information and primarily needs a trading platform, with seamless execution abilities at an ultra-low cost.

You should also talk to the broker after shortlisting a few or more, and know about the procedure, formalities, integrated account services, brokerage charges, fees, settlement charges, custody fees, privacy assessment, and additional services on demand etc.

It is also imperative to talk to prospective brokers for any offers that are available and to know how a portfolio would be transitioned to a new broking account. More importantly, the information available on publicly available sources may differ from actual, therefore it is favourable to contact prospective brokers.

While online brokerage services provide traders/investors with a seamless opportunity to take charge of their finances and invest in a range of financial instruments in an affordable and convenient way, the importance of sound investment/trading process should not be neglected.

Remember, a blind click without understanding can cost you a bunch of cash!