Online brokerage in CEE/SEE region

Transcription

1 Online brokerage in CEE/SEE region Market survey & experience of providing online brokerage services in CEE/SEE Michel Vukusic 17th Zagreb Stock Exchange Conference Hvar, October 11-14, 2007

2 Agenda 1. Introduction 2. Benefits and Risks of Online Brokerage 3. Prerequisites for Market Entry 4. Contribution of Online Brokers 5. Experience in CEE/ SEE 6. Conclusion & Challenges ecetra Internet Services AG 2

3 1. Introduction Providing Online Brokerage & Portal/Content solutions founded in % subsidiary of Erste Bank Group ~ 180 employees Turnover ~ 24 Mio. (FC 2007) Profit ~ 3-4 Mio. (FC 2007) ecetra-group ecetra Internet Services AG, a 100% subsidiary of Erste Bank is responsible for development of e-finance products and services and the related technical and business operations. ecetra Central European e-finance AG, a 100% subsidiary of ecetra Internet Services AG, with a full banking licence, runs the B2C-business in Online Brokerage under the it s brand brokerjet. brokerjet Ceske Sporitelny is a Joint Venture of Ceska Sporitelna and ecetra Internet Services AG and is responsible for the Online Brokerage Business in the Czech Republic brokerjet Slovenia is a Joint Venture of Banka Sparkasse and ecetra Internet Services AG. It is planned to start business in Summer 2008 and will offer Online Brokerage services in Slovenia. Branches in Vienna, Salzburg, Graz, Prague ecetra Internet Services AG 3

4 brokerjet ecetra Internet Services AG 4

5 WP-ISI Portal/Content solution ecetra Internet Services AG 5

6 Netbanking WP-Service (Multi-Channel-solution) ecetra Internet Services AG 6

7 2. Benefits and Risks of Online Brokerage What are the benefits of of providing Online Brokerage Services in CEE/SEE? Contribution to the local capital market Transparent and real time execution service via the local exchange Enlarging number of (private) investors/traders Additional liquidity/volume from foreign investors (broker clients from other countries) New/additional member for the local exchange Knwoledge/Education of investors/trades Investment mentality: Structured information and education of investors/traders capital markets knowledge and investment skills Risk management (diversification, money management, leverage) Channels: e-learning (internet portal, webinars), roadshows, personal trainings Stimulation for securities trading Convenient, fast and cost effective channel for investment/trading Enlarging investment opportunities (new products, asset classes, markets) Technology booster Amplify the usage and acceptance of the Internet for financial services by offering a secure and trustworthy online brokerage system ecetra Internet Services AG 7

8 2. Benefits and Risks of Online Brokerage What are the risks? IT related risks Performance, stability, scalability Proprietory & non-standard/stable interfaces to local trading/clearing systems Local (changing) regulations Security issues (phishing, pump & dump etc.) Legal and regulatory uncertainty Transition of EU law/directives into national law (time horizon, interpretation) during setup / application phase (e.g. MiFID) licence application and extension of services (Cooperation with Local Regulators, Exchange Commissions, National Banks etc.) Knowledge & investment culture Lack of trading/ investment experience Lack of trading/investment products Non-existing/conservative investment mentality (deposits) Economic & political risks/uncertainty Cooperation model with local sales/distribution partners ecetra Internet Services AG 8

9 MiFID and Online Brokerage MiFID Challenges/Topics for Online Brokers Execution policy (Best execution) Pre-/ post transparency Inducements - transparency of commisions Client risk assessment Suitability test Appropriateness test ecetra Internet Services AG 9

10 3. Prerequisites for Market Entry Prerequisites for market entry? a) Macroeconomic business indicators for online brokerage and Investment mentality/culture b) Local market requirements for online brokers ecetra Internet Services AG 10

11 3. Prerequisites for Market Entry a) Macroeconomic Business Indicators for Online Brokerage GDP per capita signal about the general demand for financial products Demand for securities: > appr EUR Internet penetration internet is a must for online brokerage business broadband connection (xdsl) preferred PC penetration normally no issue, as it is higher than internet penetration Internet banking penetration indicates readiness to use the internet for financial transactions Pre-stage before online brokerage Croatia 2006: 6,6% (Slovenia: 18%, Austria: 27%) Interest for securities & investment mentality National habits, to be considered in the product offering Focused financial products/exchanges Investment/time horizon risk attitude ecetra Internet Services AG 11

12 3. Prerequisites for Market Entry b) Local market requirements for online brokers Legal framework Market access (membership, services) MifID support Insider regulations Support of EU market usances (e.g. passporting of certificates) Legal certainty Tax Support & framework from regulators, Securities Exchanges/Commissions, National Banks and Central Depositories Support of defacto standards for securities processing (e.g. omnibus account at national depository) Mistrade regulations (derivatives quotation) Market & Static Data (RT-quotes, Level 2 information etc.) Technical support Stable & robus solutions from Sec. Exchanges & Custodians STP processes (real-time order management, without manual intervention) standardized interfaces & message protocols (FIX, Swift etc.) Liquidity Market makers ecetra Internet Services AG 12

13 4. Contribution of Online Brokers Online brokerage know how & international experience Organisational model for international securities business Business setup / Experience with international roll outs Strong project management (centralised) business operation for online brokerage/services Online brokerage tools & services Real time execution & booking Analyzing & Charting Research & News Support of new and/or local products issued in local currencies Trainings/Information (Bulls & Bears Acadamy) Competitive pricing Technology & System architecture Scalability Interfaces to local markets Language / special characters support IT-Security ecetra Internet Services AG 13

14 4. ecetra Experiences in CEE/ SEE Experiences of ecetra in CEE/SEE markets a) Our estimation of opportunities in CEE/SEE markets b) Problems encountered c) USP s d) Business development ecetra Internet Services AG 14

15 4. ecetra Experiences in CEE/ SEE a) Our Estimation of Opportunities in CEE/ SEE markets CEE/ SEE Online brokerage potential index results as of PL 21,4 AT CZ 17,3 29 SK HU 15,6 17,6 UA MD 25,4 SI 15,9 HR BA 9,8 SCG 13,4 RO BG 12,3 brokerjet subsidiary established High potential Medium potential MK Low potential AL GR TU 17 5,5 Not analysed ecetra Internet Services AG 15

16 CEE/SEE Online brokerage potential index results as of ,0 25,0 20,0 15,0 10,0 5,0 0,0 AT SI PL HU CZ GR HR SK SCG RO BA TU Internet penetration 10,0 10,0 5,3 3,1 6,7 4,7 6,3 7,1 5,5 3,3 2,9 1,1 Internet banking penetration 4,4 1,8 1,8 2,6 1,9 1,1 1,8 0,9 0,1 0,3 0,0 1,1 interest for securities 9,6 11,4 13,8 10,8 7,5 8,6 7,2 6,9 7,8 8,7 6,9 3,3 GDP level 5,0 2,2 0,5 1,1 1,2 2,6 0,6 0,7 0,0 0,0 0,0 0,0 Total 29,0 25,4 21,4 17,6 17,3 17,0 15,9 15,6 13,4 12,3 9,8 5,5 ecetra Internet Services AG 16

17 Market potential for online brokerage (II) Usage of internet per country as of July 2007 Source: GfK Austria, July 2007 ecetra Internet Services AG 17

18 4. ecetra Experiences in CEE/ SEE a) Our Estimation of Opportunities in CEE/ SEE markets 2006 Emerging Developing Mature Banking assets as % of GDP 200% 150% 100% 50% 0% Product focus / earnings drivers Ukraine Bosnia Bulgaria Serbia Turkey Romania Croatia Slovakia Poland Hungary Czech Republic Greece Slovenia Austria 0 2,500 5,000 7,500 10,000 20,000 30,000 GDP per capita (EUR) Savings, payment transfers Current accounts, debit cards, mortgages Credit cards, consumer finance = Population of 5 million Asset and wealth management, insurance and pensions Source: Erste Bank Conference call BCR acquisition, ecetra Internet Services AG 18 Online brokerage potential

19 4. ecetra Experiences in CEE/ SEE a) Our Estimation of Opportunities in CEE/ SEE markets Forecast % Emerging Developing Mature Greece Austria Banking assets as % of GDP 150% 100% 50% 0% Product focus / earnings drivers Ukraine Bosnia Serbia Bulgaria Turkey Romania Poland Croatia Slovakia Czech Republic Hungary Slovenia 0 2,500 5,000 7,500 10,000 20,000 30,000 GDP per capita (EUR) Savings, payment transfers Current accounts, debit cards, mortgages Credit cards, consumer finance = Population of 5 million Asset and wealth management, insurance and pensions Source: Erste Bank Conference call BCR acquisition, ecetra Internet Services AG 19 Online brokerage potential

20 4. ecetra Experiences in CEE/ SEE b) Problems encountered Licence application process Changes of legal regulations Online brokerage = new business model for authorities Online Brokerage System with local adaptations not available during application phase dependency of total project timeline on licence application IT effort for local adaptations Non standardised requirements => Increasing implementation costs & timeline Negative impact on business case Product positioning How to position against competitors / USP? Pricing of new products (fee schedule) Distribution/Sales Partners: Crucial for customer acquisition Client motivation and training ecetra Internet Services AG 20

21 4. ecetra Experiences in CEE/ SEE c) ecetra s USPs Securities: Shares Funds & ETFs Warrants Certificates 27 Stock Exchanges 20+ OTC trading partners 260+ Fund Companies 20+ Certificate Issuers 20+ Warrant Issuers Real Time Trading Related Products/ Asset Classes: Futures & Options CFDs FX Competitive prices Order execution within seconds Real time quotes ecetra Internet Services AG 21

22 4. ecetra Experiences in CEE/ SEE d)brokerjet Business Development financial portal members AT and CZ % Financial Portal Members % +30% +45% +50% +58% +26% FC 2008 FC Period ecetra Internet Services AG 22

23 4. ecetra Experiences in CEE/ SEE d)brokerjet Business Development client growth AT, CZ, and SI +22% % % Clients % +72% SI CZ % AT % +95%+80% FC 2008 FC 2009 FC 2010 FC Period ecetra Internet Services AG 23

24 4. ecetra Experiences in CEE/ SEE d)brokerjet Business Development transaction growth AT, CZ, and SI % % +20% Trades % +85% SI CZ AT % +614% +200%+67% FC 2008 FC 2009 FC 2010 FC Period ecetra Internet Services AG 24

25 5. Conclusion & Challenges Conclusion & Challenges Attractiveness of CEE/ SEE countries for online brokerage depends on Macroeconomic factors (GDP per capita, Internet & internet banking penetration Interest for securities/investment mentality Liquidity and offered products/instruments/companies and is increasing/improving fast In order to enter new CEE/ SEE markets, online brokers have to assess the local legal framework incl. the licence application process technical implementation incl. the effort for local adaptions committment of sales/distribution partners Entering of online brokers in CEE/ SEE markets provides: (additional) stimulation of the local capital market Education/knowledge & stimulation of the investors/traders for securities trading ecetra Internet Services AG 25

26 Thank you! ecetra Internet Services AG 26

27 BACK-UP SLIDES ecetra Internet Services AG 27

28 Organisational model brokerjet international Local entrepeneur with central know how Marketing Central Strategic Sales ecetra INTERNATIONAL Headquarter, Vienna Strateg. Productmgmt. Productdevelopment Support Operating Stratey Marketing Templates Business Development Business Development Channel Mgmt. Channel Product definition Mgmt. Monitoring Further development 2nd level Support. Developm. Operating ecetra NATIONAL subsidiary Marketing Local Sales Local Customer Support Productmgmt. Local e.g. CZ e.g. SI e.g. Austria HW/SW Invest Asset Management ecetra Internet Services AG 28

29 Case study brokerjet Ceske Brokerjet ceske was founded in 2003 and is in production since 11/2003 The company is a Joint Venture of Ceska Sporitelna (51 %) and ecetra Internet Services AG (49 %) The company holds a broker licence (not a bank licence) as per Czech law and as per requirements from local SEC The company introduced new financial products like warrants, certificates, mutual funds, savings plans to the Czech online investors, and quickly gained market share (18% by Q1.2006) Main advantage against local competitors Broad product, serving both the conservative and speculative investors New trading facilities (OTC trading) Bulls & bears academy 2005 Brokerjet Ceske had been rated by the independent financial portal idnez as best online broker of CZ Republic ecetra Internet Services AG 29

30 Case study brokerjet Slovenia benefits of expansion to Slovenia Stimulation of the Slovenian capital and brokerage market by a new market player Enrichment of the Slovenian brokerage market by offering new and comprehensive products and services to the Slovenian investors Stimulation of the LJSE trading (Slovenian citizens, additional clients from existing ecetra client base) Attractive new investment possibilities for the growing internet-affin, well educated and well situated young generation Additional services for conservative investors (eg. Savings plans) Education of interested people on capital markets know how (Bulls & Bears Academy) Amplify the usage and acceptance of Internet for business applications by provision of a trustworthy online brokerage application ecetra Internet Services AG 30

31 Improving Market Liquidity How to Improve Market Liquidity? Removing barriers which prevent market access: Harmonizing legal framework Supporting technical interface standards (FIX, Swift etc.) Acceptance of EU standards (e.g. admission of foreign securities, MiFID) Providing support for market participants: market data for in depth analysis (RT-quotes, Level II information etc.) Attracting investors and capital takers alike by transparent usances and competitive fees ecetra Internet Services AG 31