RMIT expert available for comment on rise of low-cost stock trading platforms

RMIT expert available for comment on rise of low-cost stock trading platforms

An expert from RMIT University is available to talk about the implications of the rise of low-cost stock trading platforms such as Superhero on the Australian equity market.

Angel Zhong (0433 810 413 or angel.zhong@rmit.edu.au)

Topics: fintech, retail investors, financial literacy, low-cost trading platform, behavioral finance, stock market participation

“Recent months have witnessed the rise in low-cost stock trading platforms.

“In particular, the Australian version of Robinhood, Superhero, launched recently.

“Superhero is backed by the founders of two BNPL companies, Afterpay and Zip, the market darlings on the ASX this year.

“Superhero’s entry into the market was timely, occurring when a large surge in retail trading has been observed in Australia and around the world.

“Compared to traditional trading platforms such as Commsec that charges around $19.5 per trade, Superhero charges only $5 per trade.

“Examples of other low-cost platforms include Selfwealth, IG and eToro.

“Low-cost trading platforms have both pros and cons in relation to the share market and economy.

“Low-cost trading platforms are attractive to retail investors interested in making a small investment in the share market, thus likely to boost stock market participation.

“Increase in stock market participation provides liquidity to the market and facilitates the flow of funds in the capital market.

“However, increased participation by retail investors who are prone to behavioral biases may also increase the probability of irrational trading and disrupt the efficiency of the market.

“The rise in low-cost trading platforms and the associated increase in retail investors in the share market highlights the importance of financial literacy.

“Users of trading platforms are likely to be engaged in social trading, which is one of ASIC's recent concerns. Social trading refers to exchange of stock trading ideas in groups and discussions on social media websites such as Facebook, Twitter and Reddit. 

“Retail investors are easily influenced by unmoderated commentary on the market and investing.

“With easy and low-cost trading platforms, retail investors may act on misleading information from social trading and suffer losses in a highly volatile market.”

Angel Zhong is a Senior Lecturer in Finance in the School of Economics, Finance and Marketing at RMIT University. Her research focuses on investment and investor behaviour in share markets around the world and on behavioural biases of both individual and institutional investors in share markets.

***

For media enquiries, please contact RMIT Communications: 0439 704 077 or news@rmit.edu.au

 

28 September 2020

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28 September 2020

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