Electronic trading opens new dimensions

The internet has opened up the world of investment to a new dimension. Electronic trading has become the investment industry norm and very few ‘open outcry' stock exchanges left in the world. The advantages of electronic trading to investment banks and stockbrokers are pretty obvious: speed, efficiency of pricing and liquidity.

A natural extension to this trend has been the spread of trading platforms for individual investor use. Just like institutions, retail investors now have real-time access to trading individual stocks, funds and derivatives. As growing numbers of investors do their own share buying, this has heaped pressure on traditional stockbrokers, who have historically relied upon old-world media to buy and sell shares for their clients.

Why invest online?

In today's environment, logging on to the internet has become so natural to the majority of us that it is one of the first things most of us do in the morning. The Web has become an invaluable tool for all people with an international lifestyle and it is hard to imagine a day without it. Expatriates worldwide are best placed to see the advantages of being able to have online access 24/7. Whether it is to keep up to speed with the latest news, keep track of the latest sports results, shop online or e-mail your loved ones, the Web boasts numerous advantages.

As a result usage of the internet has increased drastically in the last few years. Internet penetration in the Middle East, in particularly strong and at the end of 2010, it was recorded as 29.8 per cent, compared to 28.7 per cent in the ‘rest of the world'.

It is therefore no surprise that individuals, especially expatriates, increasingly manage their finances online. It provides an efficient and quick way to stay in control of your investments, anywhere in the world at any time. Online investing is effective and convenient and enables people to manage their investments alongside their busy lifestyles.

The key benefits of online platforms include:control, independence, involvement, monitoring, access, consistency, economies of scale, enhancement of consumer experience.

Managing your investments online may require the help of a professional. Whether the market is volatile or whether you simply appreciate having regular guidance on and assessments of your investments, you may want to speak to a financial consultant for advice.

Mutual funds

An investment consultant should be able to provide you with all the latest information on the markets, tools and information alongside a flexible product range and a wide range of investment funds, in order to provide financial advice suited to your needs.

Online platforms can be categorised into three main areas. Some platforms offer trading of individual stocks and shares in a wide range of world stock markets. Other market services selling derivative-style products such as CFDs (contracts for difference), futures and spread betting. These are essentially a way of gearing up your investment in a particular market and are higher-risk approaches. The availability of certain services depends on your jurisdiction. For example, spread betting is not permitted in the Middle East, or the US as it is deemed to be gambling.

The third access point to the financial markets is fund platforms. Also known as fund supermarkets, these are secure websites that allow investors to pick and choose from a range of mutual funds and build their own portfolios.

Some platforms simply offer as many funds as they can find and leave it to the investor to trawl through thousands of funds using search tools to narrow down their choice of funds. Other platforms offer a more restricted range of funds.

Fund platforms have become an efficient means of mutual fund distribution, generally, having low administrative costs and large networks of financial planners or bank branches through which they can distribute.

Independently minded and technologically astute investors are able to empower themselves to become as involved in the investment process as they feel necessary. The growth and convergence of two market segments has seen an unprecedented increase in the demand for technology based financial solutions.

The growth of the internet and reliance upon online technology:

This growth has been particularly high in the Middle East, where $60 million of the $1 billion invested for management on the deVere Fund Platform in its first year, came from.

How to choose the online trading platform that is right for you?

Before you decide to go forward with online trading, here are 12 must-haves which an online trading platform should offer you:

1. Access to accurate information in real time enables you to take investment decisions at the right moment.

2. High security: Make sure your platform is coded at the highest security level (i.e. SFL Security Certifcate).

3. Independent fund research: The platform you choose should include research from a global leading independent investment provider.

4. User friendly: Make sure you choose a platform that you feel comfortable with and find easy to use.

5. Client support: Advice and Help is available to online customers.

6. Established presence: Choose a fund platform that has a proven track record.

7. Client confidentiality: Your chosen online trading platform should offer high levels of client confidentiality.

8. Comprehensive and consolidated statement: Receive the maximum information to keep control of your investments.

9. 24/7 access: The online trading platform should be available to you at all times

10. Tailored/automated portfolio monitoring: With today's technology you can set automated alerts to suit your investment objectives

11. Platform based in a highly credible centre: A secure environment brings higher security (platforms based in countries such as Luxembourg will be more secure).

12. Innovative: Choose a platform that keeps up with industry and client development needs.

The writer is the regional director for Middle East P.I.C de Vere.