Australian (ASX) Stock Market Forum

Superhero - Afterpay/Zip backers fund Robinhood-style trading platform

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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.

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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."

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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.

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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."
 
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IG already offers $5 trades and no fee on overseas markets. So I don't understand why they think 5 bucks is better. Free maybe better...
 
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IG already offers $5 trades and no fee on overseas markets. So I don't understand why they think 5 bucks is better. Free maybe better...

IG charge $5 or 0.05% (whichever of the two amounts is higher), Superhero charge $5 flat regardless of the size of the trade, potentially a massive saving on a large trade. Bit not having your own HIN I consider a major disadvantage, at least with SelfWealth you have your own HIN (but $9.50 per trade)
 
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It'll never happen here of course.

Well don't get me started on cybersecurity, I believe we are only at the tip of the iceberg regarding cybersecurity issues (equity/derivative traders are especially at risk). The endless race to quickly bring new trading products to market, results in products laced with security holes. Unfortunately many security holes are not discovered in system testing, but are found by hackers when the systems are in production.
 
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Thinkmarkets
$8 per trade fixed ... up to a couple hundred grand or something (cannot remember)
Individual HIN
Phone app only

I have an account but have never used it, so cannot add more, but app looks OK when I have browsed around it (phone trading is not yet my thing)

note... web based MT4/5 ? platform is available for cfd/fx?? using a different account number for Thinkmarkets. I was only talking ASX stock trades above. I have never used, or even opened, the web platform.
 
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Thinkmarkets
$8 per trade fixed ... up to a couple hundred grand or something (cannot remember)
Individual HIN
Phone app only

I have an account but have never used it, so cannot add more, but app looks OK when I have browsed around it (phone trading is not yet my thing)

note... web based MT4/5 ? platform is available for cfd/fx?? using a different account number for Thinkmarkets. I was only talking ASX stock trades above. I have never used, or even opened, the web platform.
Interesting it's been a while since I looked at Thinkmarkets I thought they only traded in Derivatives, Forex and CFD's, a quick look shows $8 flat for trades up to $200k, may need to look at them again for ASX Stock trades. I have heard mixed reports about them, others may care to comment
 
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A 2 minute look at the superhero website debunks some of what has been said above.
Disinformation is rife in society these days & fact checking hardly existant in certain circles.
I don't have any vested interest either way.

I have taken the liberty of BOLDING some of the text copied and pasted from the Superhero website...

Are my shares secure?
Yes. All of your shares are held by OpenMarkets, our market participant. Superhero, nor any other third parties such as administrators would ever have access to your assets, unless an instruction is provided by you, the client. In the unlikely scenario where Superhero was to no longer operate, your shares can be broker to broker transferred to another account at OpenMarkets or another broker.

Do I have full beneficial ownership of my shares?
Yes, following registration, any investments acquired or any cash held on your Superhero account are held in the entity name listed on your Superhero account.

How are my shares registered with Superhero?
When you purchase shares through Superhero or other brokers, your shares are held by our regulated custodian, which sits on the CHESS system.

Your trades are executed individually, in real-time and you will always get the benefits of our market participant's Best Execution Policy. Our proprietary technology then allows us to consolidate settlements at the end of each trading day to reduce settlement costs.

We pass the cost savings onto our members, providing a highly competitive brokerage rate.

How does Superhero work and are my assets safe?
Superhero provides its customers with the ability to invest in and trade ASX-listed shares and ETFs through its trading platform. We are committed to protecting your assets and have implemented a regulated structure that keeps your investments safe and separate from Superhero’s own assets and liabilities.

Click here for a comprehensive explanation

https://www.superhero.com.au/faqs accessed 5/11/2020, 11:20.
 
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A 2 minute look at the superhero website debunks some of what has been said above.
Disinformation is rife in society these days & fact checking hardly existant in certain circles.
I don't have any vested interest either way.

I have taken the liberty of BOLDING some of the text copied and pasted from the Superhero website...

Are my shares secure?
Yes. All of your shares are held by OpenMarkets, our market participant. Superhero, nor any other third parties such as administrators would ever have access to your assets, unless an instruction is provided by you, the client. In the unlikely scenario where Superhero was to no longer operate, your shares can be broker to broker transferred to another account at OpenMarkets or another broker.

Do I have full beneficial ownership of my shares?
Yes, following registration, any investments acquired or any cash held on your Superhero account are held in the entity name listed on your Superhero account.

How are my shares registered with Superhero?
When you purchase shares through Superhero or other brokers, your shares are held by our regulated custodian, which sits on the CHESS system.

Your trades are executed individually, in real-time and you will always get the benefits of our market participant's Best Execution Policy. Our proprietary technology then allows us to consolidate settlements at the end of each trading day to reduce settlement costs.

We pass the cost savings onto our members, providing a highly competitive brokerage rate.

How does Superhero work and are my assets safe?
Superhero provides its customers with the ability to invest in and trade ASX-listed shares and ETFs through its trading platform. We are committed to protecting your assets and have implemented a regulated structure that keeps your investments safe and separate from Superhero’s own assets and liabilities.

Click here for a comprehensive explanation

https://www.superhero.com.au/faqs accessed 5/11/2020, 11:20.
Can you please elaborate on the incorrect information? You should be quoting the incorrect posting then debunking it by providing the correct information not just posting slabs of FAQ's from the Superhero website. I read all the FAQ's and downloadable documents before posting, if something I has posted is incorrect I would like to know what it is so I can correct it and learn from it.
 
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My above post was in reply to a post by frugal.rock, excerpt below (original post now deleted)

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