Australia’s financial market and brokerage firms are currently going through a transition of a stream of new competitors looking to enter the market of their trading platforms, all commission-free. The most recent competitor that has come to light is eToro, a social trading platform that provides global financial services to clients from multiple trading instruments.
Who is eToro?
eToro was established in Israel in 2006, and slowly expanded until it reached Australia in 2018 during the apex of the crypto-currency market.
Shortly after, the company managed to close a $US100m ($147.2m) Series E funding round that was headed by China Minsheng Financial. As the newest broker that is entering Australia, the eToro trading platform is relevant to two important aspects: the introduction of commission-free brokerage, and the constant rise of social trading. Social trading is the ability for traders to match their trades after their fellow traders or experts who are more experienced.
eToro’s Australian managing and administrative director, Robert Francis, stated that the financial services provider was moving towards basing its domestic trading instruments around crypto-currency and shares. However, eToro is currently awaiting approval from the regulatory agency of Australia, ASIC, for securities-brokerage financial services that revolve around social trading.
Robert Francis has announce that both parties are still in the discussions and negotiations phase, where they are attempting to secure a partnership agreement that would permit eToro with access to a domestic licence for trading. There are high hopes that by the beginning of 2020, Australian traders will be introduced to the dual-service platforms that provide copy trading and all its advantages.
What is Copy Trading?
Robert Francis demonstrated the process of copy trading in eToro and the business model it follows. “You’ve got to demonstrate experience, so for starters we’re looking for a demonstrated track record of investment on our platform,” Francis stated.
“Then once selected, you’re assessment is based not only on performance, but also the amount of funds in your account. We don’t approve traders who have generated an outsized return with a leverage trade, but are only trading small amounts.”
“Professional traders have a mutual interest to engage because they get paid by eToro for building a follower base,” Francis clarified. “So ultimately it’s about creating an environment for responsible investing with sustainable returns.”
“The main focus will be on thematic portfolios, where eToro offers investments in different trends such as AI, FinTech and cannabis,” Francis states.
“It’s not a new concept, but we’ve created it in a slightly different manner where portfolios are re-weighted on a monthly and quarterly basis depending on performance.”
“Ultimately, our intention is to move into other financial services such as debit cards, so customers can get simple access to their trading account.”
However, eToro awaits approval in order to step into the Australian market and introduce copy trading.