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The founders of buy now, pay later juggernauts Zip and Afterpay are among the backers of a new low-cost Australian share trading platform that hopes to capitalise on the rush among young investors into the stock market.
The share-trading site – named Superhero – is set to launch on Monday and is charging a flat fee of $5 per trade with minimum investments of $100.
Wayne Baskin (left) and John Winters are launching an app allowing Australians to buy shares with a $5 commission. Photo: Rhett Wyman/AFR
Superhero, which the founders say has been two years in the making, has emerged amid a surge of retail interest in the sharemarket, particularly among young investors that have taken to trading during the COVID-19 lockdown.
The unveiling follows an $8 million capital raise led by Zip co-founder Larry Diamond that was also backed by Zip chair Philip Crutchfield, well known lawyer Leon Zwier of Arnold Bloch Leibler and Garen Azoyan, the chair of CareerOne. Mr Crutchfield will chair the company.
Afterpay co-founder Nick Molnar is also among the investors in Superhero Holdings, which was set up in 2018 by John Winters and Wayne Baskin, according to a regulatory search of shareholders.
"We're making investing accessible to the younger generation," Mr Winters told The Australian Financial Review. "There are a lot who feel locked out of the market. So they're going to the high-cost incumbents but they don't really have to anymore."
Zip co-founder Larry Diamond is an investor in Superhero Peter Braig
Both Mr Winters and Mr Baskin are 36. Mr Winters was a stockbroker at Shaw & Partners and was one of the early champions of Zip Ltd, which found its way on the ASX via a backdoor listing and has grown to a market capitalisation of $3.4 billion.
Mr Baskin was previously on the advisory board of Afterpay and is currently the chief technology officer and deputy chief executive of online retailer Booktopia.
The rise of retail trading is a global phenomenon encapsulated by the success of US share trading application Robinhood, which charges no brokerage and allows users to buy fractions of shares.
But the Robinhood effect in Australia is strong too as young investors have taken to day trading – and have gravitated towards stocks like Afterpay and Zip, which despite only recently entering the S&P/ASX 200 index are among the market's most actively traded stocks.
Making a play
The share trading application aims to challenge the likes of SelfWealth, which charges $9.50 per trade, and the dominant player CommSec, which charges a minimum of $19.95.
That's in addition to a range of CFD providers that are aggressively marketing themselves as low-cost trading venues.
These players have experienced enormous growth in trading volumes. SelfWealth recently reported that monthly trade volumes had increased from around 20,000 at the end of 2019 to almost 140,000 in June.
Platforms such as Stake that have focused on providing low-cost access to international share markets have also experienced a surge in interest.
Mr Winters said Superhero is targeting experienced investors, investors that have traded infrequently in the past and those that have used top-up apps to gradually invest small amounts in the market.
The low-cost trading is possible, Mr Winters says, because they will hold members' shares in a single special-purpose Holder Identification Number, rather than having each member assigned a HIN on ASX's CHESS system.
He says each trade will be individually transacted while settlements are consolidated to save costs that can be passed on to members.
"Old-school brokers are still using all these manual processes and because that's the way it works, that's the way it is," said Mr Baskin. "We're here saying, well, why is it that way. We're questioning everything and digitising age old problems and processes."
Mr Winters says the model, which has been subject to audits, is analogous to wealth management platforms or wraps such as Netwealth.
"We're not going into this with our eyes shut," said Mr Baskin.
"We tested the market, tested the platform, engaged with regulators, auditors, the ASX, the banks. We've put this through the wringer."
The emergence of Superhero is the latest example of Australian providers attempting to emulate the US low-cost brokers.
“In the US, there's this massive redistribution of retail volumes in the stock market away from the traditional brokers to the likes of Robinhood," said Mr Winters.
But they're having to overcome the high costs associated with trading on the Australian market.
Robin-who
One of the reasons there's no Robinhood equivalent in Australia offering zero-cost trading is the difference in market structure – as there are no high-frequency traders and competing exchanges that are prepared to pay retail brokers for order flow.
The model is now under scrutiny as Robinhood is facing regulatory probes relating to the initial non-disclosure of its practice of selling its order flow to high-frequency traders.
But there's no doubt the easy-to-use low-cost trading apps such as Robinhood have helped spur the rush of individual investors to the market that had become a lot more interesting since March's crash unleashed spectacular share price moves.
Friday's tech-stock crash may have hurt some of this new cohort of traders, but it is unlikely to deter more entering the market.
"It's the periods of high volatility that drive volume in the market," says Mr Winters.
"That has been my experience my entire career – volatility drives volume."
The share-trading site – named Superhero – is set to launch on Monday and is charging a flat fee of $5 per trade with minimum investments of $100.
Wayne Baskin (left) and John Winters are launching an app allowing Australians to buy shares with a $5 commission. Photo: Rhett Wyman/AFR
Superhero, which the founders say has been two years in the making, has emerged amid a surge of retail interest in the sharemarket, particularly among young investors that have taken to trading during the COVID-19 lockdown.
The unveiling follows an $8 million capital raise led by Zip co-founder Larry Diamond that was also backed by Zip chair Philip Crutchfield, well known lawyer Leon Zwier of Arnold Bloch Leibler and Garen Azoyan, the chair of CareerOne. Mr Crutchfield will chair the company.
Afterpay co-founder Nick Molnar is also among the investors in Superhero Holdings, which was set up in 2018 by John Winters and Wayne Baskin, according to a regulatory search of shareholders.
"We're making investing accessible to the younger generation," Mr Winters told The Australian Financial Review. "There are a lot who feel locked out of the market. So they're going to the high-cost incumbents but they don't really have to anymore."
Zip co-founder Larry Diamond is an investor in Superhero Peter Braig
Both Mr Winters and Mr Baskin are 36. Mr Winters was a stockbroker at Shaw & Partners and was one of the early champions of Zip Ltd, which found its way on the ASX via a backdoor listing and has grown to a market capitalisation of $3.4 billion.
Mr Baskin was previously on the advisory board of Afterpay and is currently the chief technology officer and deputy chief executive of online retailer Booktopia.
The rise of retail trading is a global phenomenon encapsulated by the success of US share trading application Robinhood, which charges no brokerage and allows users to buy fractions of shares.
But the Robinhood effect in Australia is strong too as young investors have taken to day trading – and have gravitated towards stocks like Afterpay and Zip, which despite only recently entering the S&P/ASX 200 index are among the market's most actively traded stocks.
Making a play
The share trading application aims to challenge the likes of SelfWealth, which charges $9.50 per trade, and the dominant player CommSec, which charges a minimum of $19.95.
That's in addition to a range of CFD providers that are aggressively marketing themselves as low-cost trading venues.
These players have experienced enormous growth in trading volumes. SelfWealth recently reported that monthly trade volumes had increased from around 20,000 at the end of 2019 to almost 140,000 in June.
Platforms such as Stake that have focused on providing low-cost access to international share markets have also experienced a surge in interest.
Mr Winters said Superhero is targeting experienced investors, investors that have traded infrequently in the past and those that have used top-up apps to gradually invest small amounts in the market.
The low-cost trading is possible, Mr Winters says, because they will hold members' shares in a single special-purpose Holder Identification Number, rather than having each member assigned a HIN on ASX's CHESS system.
He says each trade will be individually transacted while settlements are consolidated to save costs that can be passed on to members.
"Old-school brokers are still using all these manual processes and because that's the way it works, that's the way it is," said Mr Baskin. "We're here saying, well, why is it that way. We're questioning everything and digitising age old problems and processes."
Mr Winters says the model, which has been subject to audits, is analogous to wealth management platforms or wraps such as Netwealth.
"We're not going into this with our eyes shut," said Mr Baskin.
"We tested the market, tested the platform, engaged with regulators, auditors, the ASX, the banks. We've put this through the wringer."
The emergence of Superhero is the latest example of Australian providers attempting to emulate the US low-cost brokers.
“In the US, there's this massive redistribution of retail volumes in the stock market away from the traditional brokers to the likes of Robinhood," said Mr Winters.
But they're having to overcome the high costs associated with trading on the Australian market.
Robin-who
One of the reasons there's no Robinhood equivalent in Australia offering zero-cost trading is the difference in market structure – as there are no high-frequency traders and competing exchanges that are prepared to pay retail brokers for order flow.
The model is now under scrutiny as Robinhood is facing regulatory probes relating to the initial non-disclosure of its practice of selling its order flow to high-frequency traders.
But there's no doubt the easy-to-use low-cost trading apps such as Robinhood have helped spur the rush of individual investors to the market that had become a lot more interesting since March's crash unleashed spectacular share price moves.
Friday's tech-stock crash may have hurt some of this new cohort of traders, but it is unlikely to deter more entering the market.
"It's the periods of high volatility that drive volume in the market," says Mr Winters.
"That has been my experience my entire career – volatility drives volume."
