World Telecommunication Day 1999 |
Japan is taking its first major stride toward introducing on-line investing to individual consumers, partially as a result of a new set of rules that allow for massive cuts in brokerage commissions.
About 40 firms are jumping into the on-line brokerage business in Japan, all of them after the massive prize of approximately $10.5 trillion in personal savings.
Interest rates at banks are less than 1 percent, and commission rates at brokerages make it difficult for individual investors to be market players. With Japanese stocks starting to show signs of life after an almost decade-old plunge, on-line brokerages have the potential to bring stock trading to a nation of investors looking for better returns on their assets.
The new rules, which came into effect on Oct. 1, allow for massive cuts in brokerage commissions. A trade of 1 million yen ($9,345), which used to carry a commission of 15,000 to 11,500 yen, will be available at some on-line brokers for as little as $9
The commission cuts are part of Japan's deregulation of the financial markets, dubbed the ''Big Bang.'' The cuts will allow brokerages to offer competitive prices on trades of less than 50 million yen, and some industry experts say that trading activity could increase by as much as 20 percent over the next year and a half thanks to the commission deregulation.
On-line trading began in Japan in April 1996, when the nation's second-largest brokerage, Daiwa Securities Co., started up its operations. Number-one brokerage Nomura Securities and Daiwa are now the top on-line brokerages in Japan, with each holding more than 40,000 of the roughly 130,000 on-line trading accounts in the country.
New and cheaper
Attention is not being focused on the current industry leaders, however, because their commission cuts will not come near the cut-rate services being offered by a host of new on-line brokerages.
While Japan's major brokerages may offer between 10 percent and 30 percent commission cuts, rival discount brokerages will cut commissions by as much as 90 percent for their Internet transactions.
Monex Inc., one of the new on-line brokerages, has already garnered a great deal of attention. The company was established in April by Oki Matsumoto, a former partner at Goldman Sachs Group Inc. and was bankrolled with a major investment from electronics giant Sony Corp.
The company has said that it will offer some of the lowest commissions available to consumers. Monex, which went on-line in September, aims to have 50,000 brokerage accounts by the end of March 2000.
Some foreign brokerages have turned to Japanese partners to start on-line trading businesses in the country. The local partners should allow Internet brokerages such as Charles Schwab, E*Trade and DLJdirect to tie into their partners' client bases and experience in the local market.
Charles Schwab has teamed up with major insurance company Tokio Marine & Fire Insurance Co. for its Japan business, while DLJdirect has joined hands with the major bank Sumitomo Bank Ltd.
E*Trade found a partner in Japan's premier Internet company, Softbank Corp.
The second-tier Japanese brokerage Matsui Securities Co. Ltd., not to be outdone by foreign rivals, will tie up with the trading house Uchida Yoko and Fujitsu Business Systems to form an on-line brokerage that plans to have some of the lowest commissions in the business.
Industry analysts say that foreign firms will be on the offensive in order to quickly build their account numbers and carve out market share.
Brokerage sites:
Daiwa: http://www.daiwa.co.jp
DLJdirect: http://www.dljdirect-sfg.co.jp
Nomura: http://www.nomura.co.jp
Matsui Securities: http://www.matsui.co.jp
Monex: http://www.monex.co.jp
Jonathan Herskovitz