Low-cost trading platform Mexem Africa is signing up new clients at a record rate – in fact, doubling the number of new clients during the lockdown.
Alexa Abramovici, head of sales and marketing at Mexem, explains the apparent appetite for risk from investors and traders: “Many of our new clients are signing up because we can offer them substantially lower costs than elsewhere, but there are also a number of younger Generation Z traders who are attracted by the extreme volatility we have seen in the last few months. Another factor driving the number of new sign-ups is that people want exposure to the international market, not just the JSE.”
Mexem offers South Africans an easy route to more than 120 markets worldwide, through its New York-based broking partner Interactive Brokers, one of the largest trading platforms in the US. That exposes clients to tens of thousands of investment opportunities globally, including commodities, forex and bonds, versus little more than 400 companies on the JSE. It also allows clients to benefit from Interactive Brokers’ global scale and reach, which means lower trading costs.
“What people are looking for is the same kind of investment opportunities you would get, at the same costs, as if you were living in London or New York,” says Abramovici. “What we are able to offer is much lower trading costs than is typically available in SA.”
Other South African trading platforms charge commissions of around 0.35% of the trade amount or between $2c and $6c per share on each trade they execute in the US market. Most also take a minimum commission of between $15 and $20, regardless of the size of the trade. By comparison, Mexem charges clients only $1c per US share or exchange-traded fund (ETF) and takes a minimum commission of only $1 per trade.
If that seems enticingly low, it’s about to get a whole lot better. In September 2019, Interactive Brokers launched zero-fee trading for US residents, and this is something Mexem is planning to introduce in SA in the future.
Signing up can be done online at www.mexem.co.za and funds can be deposited either into a local bank account or transferred to a Citibank account in New York using your R1 million a year foreign investment discretionary allowance. Until recently, South Africans had to rely on professional fund managers to handle their foreign investment accounts for them. Now they can do this themselves, at a fraction of the usual cost, with tons of high-quality research being made available to investors as part of the service.
The hand-holding process
What has also worked in Mexem’s favour is its online support. New clients are guided through the sign-up process, through to money transfer and the purchase of their first shares. Once through those hurdles, most are able to continue on their own with only occasional support from the Mexem staff who are available by phone, via email or through the website.
The launch of Signals Bank
Another key benefit to Mexem clients is the launch of Signals Bank for investors who do not have the time to follow global market trends but want to mimic proven and tested trading strategies, from low to high risk and everything in between. These trading strategies have been tested by a team of 60 quant and data analysts in live trading environments, and can now be followed by Mexem clients in real time. Once a trading strategy is selected, the client can then elect to manually execute on recommendations, or let Mexem’s computer systems do it all automatically.
This, says Abramovici, is the future of investing. “We have developed these strategies because we understand that people do not have the time, unless they are professionals, to intimately follow market developments. The advantage here is that you can select a strategy based on your own individual risk appetite and investment preferences. These algorithms have been chosen for their consistent outperformance of the relevant benchmark indices, and new strategies catering to an increasingly diverse investor base are being added regularly.
What’s driving the rush into stock markets?
The rebound in the JSE after its 34% Covid crash has taken many professional fund managers by surprise. The JSE All-Share index is now back within 8% of the February peak, just before it crashed.
The story is pretty much the same for the Dow Jones Industrial index, which fell 32% from its February peak but has since recovered most of this loss.
What could possibly be driving this rebound to the teeth of the coronavirus catastrophe?
CNBC, Barrons and other press outlets appear to have picked up an anomaly: an ambush by a younger group of traders seeing opportunity in distressed stocks abandoned by the likes of Warren Buffet and other professional fund managers. We have seen interest in the markets at an all-time high.
Mexem has shown itself to be massively disruptive in the trading and investment arena by upending a business model that had served local brokers handsomely for decades. Having drastically lowered fees and made investing a relatively painless and virtual experience, the next phase of the company’s growth promises to be even more disruptive as zero-fees and other benefits are brought to the local market.
Brought to you by Mexem Africa.