Source: Wealth Creator Magazine March/April

Growing efficiency seems to be the key to maintaining the consistency in market performance. Affordability also plays its role. Traders pay a flat fee of 22 cents every time they use the service and data sent is charged at 2.2 cents per kilobit transferred. Broker fees are also required.

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Phone It In

Source: Wealth Creator Magazine March/April

Phone it in.

Back in March 2000, our New Zealand neighbours made history in the Asia Pacific region by being the first to launch a system that allows share trading using a mobile phone on the Internet.

It was a breakthrough that promised to deliver a spate of new ways to trade. A mini revolution was at hand as NZSE Deputy Chairman Simon Allen made the first live trade. Brokers, who would set limits for the transactions they could undertake, then registered investors.

The breakthrough in Asia Pacific

The breakthrough emerged after a joint two-month venture between Hewlett Packard , Texas based Tantau Software and the exchange. “This is the first time to our knowledge that an exchange has delivered securities trading services directly to individuals, said Ken Middleton, a marketing manager for HP in Australia and New Zealand.

“Other examples of Internet trading and wireless access all use a broker’s connection with the exchange to process orders.”

The system used a wireless application protocol (WAP), which could be used on mobile phones able to link to the Internet.

“The technology we are demonstrating today will improve efficiency in the existing market. It will facilitate competition by improving access and it will open up access to new markets for our brokers,” said NZSE Managing Director Bill Forster.

“It will expand their traditional client bases by attracting non-traditional investors who would not have entered the market before it became so much more accessible via the Internet. It will also enable brokers to offer new services to existing clients,” Forster continued.

This is all old news now. For most people if their phones do not have WAP capabilities they may as well be living in the ’70s. However, this advancement opened the door for many more forward steps in the trading industry.

GPRS

The latest advancement to hit Australian shores is a platform that allows traders with GPRS-enabled mobile phones to trade over 2,000 CFDs, commodities and foreign exchange instruments.

“With an estimated 17 million Australians using mobile phones and with the growing number of CFD traders using our Marketmaker platform, we believe this is the best way to meet the growing demand from our tech savvy clients who want to actively trade the markets wherever and whenever they want,” said David Trew, Managing Director, CMC Markets Asia Pacific.

The Marketmaker platform was first launched in 1996 in the United States, so it is no new discovery. However the Australian market is yet to experience this tool, which allows traders to monitor the market from wherever they are and open and close positions accordingly.

The name cleverly takes its genus from the market maker – a broker-dealer firm that accepts the risk of holding a certain number of shares of a particular security in order to facilitate trading in that security. Each market maker competes for customer order flow by displaying buy and sell quotations for a guaranteed number of shares. Once an order is received, the market maker immediately sells from its own inventory or seeks an offsetting order. This process takes place in seconds. The NASDAQ is the prime example of an operation of market makers.

There are over 500 member firms that act as NASDAQ market makers, keeping the financial markets running efficiently because they are willing to quote both bid and offer prices for an asset. (Source: Investopedia.com )

Staying consistent

Growing efficiency seems to be the key to maintaining the consistency in market performance. Affordability also plays its role. Traders pay a flat fee of 22 cents every time they use the service and data sent is charged at 2.2 cents per kilobit transferred. Broker fees are also required.

“In our preliminary trials, we found the average GPRS data usage to be about 150 kilobytes per hour,” said the CMC boss.

However this figure will vary dependant on trading patterns and current day volatility.

There is some dissent among brokers about trading via mobile phone, with a fear that inexperienced traders may use the platform with little understanding of what they are doing or getting themselves into. However, the platform doesn’t eliminate the need for a broker, expert advice should still be sought and all precautions should be taken before entering into a trade. Trading remains the same. The same due diligence is required; research and market analysis is crucial. What the new technology does is put the trade at your fingertips once you have completed your research and know exactly what commodity or CFD you want to trade.

CFDs

CFDs have become very popular as they avoid stamp duty and similar taxes. They also allow margin deposit trading. With CFDs the buyer does not own the share but enters a contract designed to make a profit or avoid a loss. This occurs by referencing movements in the price of an underlying item. CFDs and Marketmaker would seem to be a unique fit.

There are other phone-based platforms on the market. HSBC use PhoneTrader which allows you to trade on the ASX from anywhere in the world. This works by recognising a numeric code assigned to each company on the ASX . Even the Bombay Stock Exchange got in on the act in July 2005 when they launched BSE MobiTrade, allowing the Internet trading user to place an order on BSEWebx either through the computer or mobile phone.

It was only a matter of time before the mobile phone became a trading tool. Once WAP was introduced the potential became unlimited. Not only can you dial up the Internet, you can check the football scores, obtain a weather report, check news developments and now trade. For something to succeed, particularly if it is new to a foreign market, it must add value to the consumer and the word is that having already succeeded globally Marketmaker should soon be an effective tool in any trader’s bag of tricks.

More info:

Find further information on the CMC Markets mobile trading platform at www.cmcmarkets.com.au