AlgoMerchant's trading platform 'for the rest of us'
By Benjamin Cher February 12, 2016
- Offers third-party algorithmic trading for retail investors
- Secured US$930K pre-Series A round led by East Ventures
RETAIL investors – individuals who buy stock on their own personal accounts – don’t get as much love as high net worth individuals and institutional clients. They do not get access to services such as portfolio management or tools like algorithmic trading.
Singapore-based AlgoMerchant seeks to change that, by providing retail investors with the tools and platform to engage in discussions and trade.
The financial technology (fintech) startup has high ambitions too, with chief executive officer Justin Tjoa declaring that it will be the ‘Uber’ of funds management and investment.
“We allow the community to contribute to the community, where they can be their own portfolio managers, providing services for others to follow their portfolios.
“We have the technology to support traders and investors with different kind of algorithmic tools,” he tells Digital News Asia (DNA) in Singapore.
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The platform is currently open only to invited users, with the startup aiming for an official launch in March, according to Tjoa, adding that it has “a few hundred users” already.
“Some users have come to register with us, and we have given seminars before where over 50% of the participants signed up for an account,” he claims.
Plugging the gap
Having a background as an algorithm trader with Phillip Capital and helping CIMB Bank build a trading platform gave Tjoa an inside look into the industry, and allowed him to identify the gaps that exist, he says.
“I meet a lot of traders, and I find that there is a gap in the market. I find that there is something similar being started in the Europe and the United States, but I think they are still not good enough.
“There is still a lot of space for me to move and get better than them,” he declares.
Beyond just opening up users’ portfolios to each other, AlgoMerchant is offering what other social investment platforms lack: The ability to buy and sell stocks.
“We are connected to [stock] exchanges through various broker-dealers, but we can’t disclose who they are,” says Tjoa. “We have partners overseas as well as in Singapore.”
Traditionally investors, even retail ones, rely on traders to monitor prices and execute trades, rather than doing it themselves online.
This behaviour is beginning to change, but AlgoMerchant is looking to accelerate that change, according to Tjoa.
“The trend is not changing rapidly enough because the online platform is still confusing, in my opinion, and is not providing any added value,” he says.
“People are investing based on rumours,” he adds.
But doesn’t that mean cutting out the middlemen, the traders and brokers? Wouldn’t they be threatened by such a platform?
Not so, according to AlgoMerchant vice president of sales Rein Chua.
“We are a complement to them – when brokers tap into our platform, they will benefit from the volume of transactions,” he says.
“By the way, brokers are our clients as well,” quips Tjoa. “We become a channel for people to go in and bring business for them.”
Adds Chua: “Using the phone, the price changes [during the call], and how many people can use it at the same time? With our platform, we can serve like 1,000 people at the same time, and that makes a difference.”
AlgoMerchant also allows algorithmic trading, or black box trading, which uses advanced mathematic models to make transaction decisions.
“There are different ways of buying and selling, you can channel algorithms as well,” says Tjoa.
“We have some tools to help you build and host your algorithms, as well as our own inhouse algorithms,” he adds.
Funding and plans
AlgoMerchant is focused on Singapore for now, but when asked if the low liquidity and volume in the Singapore stock market might pose an issue, Tjoa disagrees.
“We believe we are creating new markets, because if there was no Facebook, people wouldn’t be using social networks either,” he says, ignoring social sites like MySpace and Friendster.
“We are trying to work out something with the Singapore Exchange (SGX), but nothing we can disclose yet.
“We want to change the ecosystem for Singapore investors,” he adds.
But Singapore is also just a stepping stone, with Tjoa declaring that the platform is not limited to the city-state.
“We are not the kind of business that is very hard to move, we can go any market we can tap into,” he says.
“We are expanding into a new market in six to 12 months,” he adds, declining to disclose specifics.
Chua claims the fintech startup has been fielding calls from other markets to try the platform, but the focus remains on the Singapore market first. “It depends on opportunities,” he adds.
Investors have bought into the idea. AlgoMerchant previously secured a grant from the Media Development Authority of Singapore’s I.Jam scheme after starting out in the Nanyang Technological University accelerator NTUitive.
It also recently closed a S$1.3-million (US$930,000) pre-Series A round led by East Ventures. These funds will be channelled mainly into hiring new talent, as well as marketing, according to Tjoa.
“All, technology, sales, financial engineers and support” departments will be expanded.
“The funding is essential to support our launch which requires manpower, infrastructure, legal and marketing,” he adds.
Meanwhile, in an official statement, East Ventures managing partner Willson Cuaca said, “… the AlgoMerchant team and vision fit into our hypothesis nicely.
“We strongly believe that their approach will disrupt retail investing and introduce new ways to trade stocks,” he added.
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