• Monex will start trading platform for `active' individuals
  • Wants to capture business from 20% of Japan's day traders

Monex Group Inc. is seeking more business from Japan’s growing ranks of day traders, in a bid to catch up with other online brokerages.

“Even if the investor pie for Japan’s stock market doesn’t increase, we’re going to muscle in on the huge business that competitors are doing with active traders, an area where we’re weak,” Monex President Oki Matsumoto said in an interview in Tokyo. Matsumoto said he wants about 20 percent of the nation’s day traders to be its customers within three years, without disclosing his firm’s current market share.

Online brokerages such as Matsui Securities Co. and SBI Securities Co. have outpaced Monex in catering to the trading needs of Japanese who make a living or supplement their income by buying and selling stocks from their homes each day, the so-called day traders.

Monex plans to roll out a trading platform next year, delayed from the second half of this year, targeting both professional and semi-professional day traders, and has hired staff to train them to use the new tool, he said.

Day traders

Takayuki Hara and Koichi Niwa, analysts at SMBC Nikko Securities, Inc. cut their earnings forecasts for Monex on Nov. 26, citing in part the delay in the roll-out of the new day-trader equity tool, as well as increasing development costs and flat trading levels. They lowered their net income forecast for Monex by 40 percent for the year ending March 31, 2016 to 4.6 billion yen ($37.7 million).

Day traders have become more prevalent in Japan since the stock market rally that followed Shinzo Abe’s appointment as prime minister three years ago. They accounted for about 65 percent of transactions at online brokerages in March, up from 48 percent in September 2012, according to a survey by the Japan Securities Dealers Association. The Topix index has risen about 80 percent since the end of 2012, bolstered by Abe’s fiscal policies and unprecedented monetary easing by the Bank of Japan.

Despite the rise of the day traders, who move in an out of shares on a daily basis, Abe has had limited success in getting Japanese individuals to shift more of their long-term savings into stocks. Households still only had about 11 percent of their $14 trillion of financial assets in equities at the end of June, central bank figures show.

The frequency of the transactions done by day traders, who use leverage or borrowed money from brokers to trade, means their share of the market is disproportional to their actual number. There are 200 to 300 day traders in Japan who each trade more than 200 billion yen a year, according to a report commissioned by Matsui, Japan’s third-largest brokerage by market value.

About 74 percent of stock transactions by value on Matsui’s online trading systems came from day traders in the year ended March, the company said.

Trading Platform

Monex is working on the new trading platform with TradeStation Group Inc., a Florida-based online broker that it bought for about $400 million in 2011. While the Japanese company may enter new partnerships with other companies, it has no plans for further acquisitions on the scale of the TradeStation purchase, Matsumoto said.

Monex’s earnings have trailed those of its competitors. The company posted profit of 3.5 billion yen in the first half of the current fiscal year, compared with Matsui’s first-half net income of 8.6 billion yen, and 12.3 billion yen at SBI Securities.

Monex’s customers tend to refrain from trading when the market is sluggish, according to a report by SMBC Nikko. The firm will continue to “significantly lag” peers in day trader services and it will take time to confirm if its efforts fail or succeed, the report stated.

Matsumoto said he will make fees for the new trading tool competitive, without giving details.

“Even if the macro economy doesn’t change, through our own efforts we can take business from others,” Matsumoto said.

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