INTERVIEW: Kevan Hull – Saxo Capital Markets

SIAS recently conducted a Q&A interview with Kevan Hull, the head of institutional & private client marketing at Saxo Capital Markets, which is one of the leading online trading providers here in Singapore and the region. Its online trading portal is used by more than 85,000 users worldwide.

SIAS: When was your company operation set up in Singapore?
Hull: Saxo Capital Markets officially opened in Singapore in November 2006. The company has grown rapidly to employ 110 staff, of which 90% are local to Singapore.

Why Singapore? Do you have operations elsewhere in Asia?
We chose Singapore because it is a key financial hub in Asia. From a strategic point of view, its position will play a significant role in the future of Saxo's business in the region. We aim to use Singapore as a base to tap into the burgeoning Asia-Pacific markets and to secure a healthy market share in the region's online trading arena.

Over the last year, more Saxo Bank Group offices have opened in Asia. In June 2008, Saxo Bank Japan was launched to tap into Japan's very dynamic online trading landscape as Japanese investors are very technology-driven and there is growing demand for the online trading services.

In May of this year, Saxo entered a Memorandum of Understanding with Australian brokerage firm Tricom to acquire 35% stake in the company. The transaction builds on existing strong relationship and mutual capabilities. This is an important step in strengthening Saxo's presence in the Australian & New Zealand markets, and in the rest of the Asia Pacific region. Saxo Bank Group also opened a representative office in Beijing in October of last year.

Some online products offered these days were previously the exclusive domain of private banking or institutional clients – why is it that it's only now that they are made more accessible to retail investors? Since when were they made more accessible?
Actually these products have been made available to online investors since the early 1990's, so it's not a new phenomenon. However, two factors have help to drive the use of online products by retail clients – financial liberalisation and the growth of internet usage. These two factors combined have given more power to retail investors who want to take trading into their own hands. Fast access broadband has aided connectivity throughout the region to enable this trading activity.

Online trading of securities came first but the real driver in derivatives started around 1997 in Europe, principally in Scandinavia and the UK, particularly with regards to contracts for difference (CFDs). There were several companies that began driving this process and the market grew rapidly.

One would expect trading activities to drop due to the current market turmoil. On the contrary, CFD trading has grown significantly over the last year. For example, the volume of money traded using index-tracker CFDs jumped 292% in January 2008 to €6.3bn versus January 2007 while single-stock CFD usage was up 39% to €4.5bn over the same period.

The Saxo Bank Group has since seen its profits soar by 78% to €49 million before tax in 2007 compared to €27.5m in 2006. These results show the strength of the bank's franchise in a year that saw significant investments in a global expansion programme.

How much does it take to start an account?
An account for SaxoTrader Private, which allows for the trading of a full suit of products, starts from S$15,000.

How have traders here taken to the new products? Are we still in educational phase?
However savvy these traders are, we believe that it is important to educate and orientate users of SaxoTrader so that they can get as much out of the trading platform as possible. That is why we hold regular, free, workshops on SaxoTrader. These workshops are designed to introduce new clients to the basics of building trade-ready workspaces, as well as information on trading stocks, forex, CFDs, options and futures. Overall, we really want our clients and prospective clients to thoroughly understand the potential benefits of using these instruments, but also the risks, so that they can make optimal trading decisions.

What's the profile of the average investor that trades online?
The average profile of an investor that trades online is one who is interested in the markets. This person is also confident, entrepreneurial and wants to be in control of his or her decisions. We understand that a lot of investors are getting more sophisticated and are constantly on the go. That is why we have recently launched SaxoWebTrader and SaxoMobileTrader, which enable clients to access their portfolios and trade from any application with web browsing capabilities. We believe this product enhancement is timely given that market volatility is at its peak and speed offering the key to profiting from market movements.

Are there any difference in trading styles between traders here and elsewhere?
There are different trading styles even between countries in Asia. However, much also depends on market conditions. Current market conditions have made traders more cautious, and the best way to play it is to minimise risks by diversifying one's investment portfolio.

Do you see growth in trading volumes & number of online users?
Broadly speaking while only 23% of investors in this region currently trade online, we expect around an 8% increase in pick-up annually, and in a further five years we expect 40% of the investment community to be trading online.

What are the types of online products available to investors here?
Stocks, forex, CFDs, options and futures are available to investors here. The SaxoTrader platform enables trading of over 150 FX crosses, 24 exchanges, futures, options and equities. This includes the recent addition of stocks and CFD trading on the Hong Kong Stock Exchange. All the instruments are explained on Saxo Capital Markets' website www.saxomarkets.com.sg

Given the sub-prime fallout -- is liquidity a problem? Can traders draw more than what they place in their account initially for example, much like the equivalent of a bank overdraft with an online trading company?
No, traders cannot draw out more than what they place in their account initially. One has to remember, however, that derivatives are leveraged. This means an investor can take potentially large positions with a relatively small margin (2% of the contract value for foreign exchange for example).

What can investors expect from setting an account?
Saxo Capital Markets prides itself on its dedication and passion it puts into customer service. Investors can expect the following customer services when they use SaxoTrader – all geared towards enabling investors to have the tools and information necessary to make well informed trading decisions.

• Personalised customer support 24/5
• Real-time streaming news from reputable independent news providers
• Advanced chart toolkit
• Full execution and risk management
  
• Research and data analysis information from industry leaders as well as in-house experts
• Cross asset account summaries to help control activity.

How does the portal help investors to manage risks?
The major advantage is having stocks, futures, FX, CFDs, precious metals and options all on one page and in real time. The account summary includes all the client's investment in one account so that you can instantly see your bottom line which is marked to the market. Furthermore, the very nature of these instruments allows an investor to reduce risks through hedging a portfolio. You can take short positions in CFDs or futures to hedge your physical equities.