Equity trading in the emerging markets: TradeNet advises

World Finance speaks to the President of TradeNet – a leading equity order management company based in Saudi Arabia – to discuss what advice first-time traders in the emerging markets need

November 19, 2014

Equity trading when approaching emerging markets can be tricky to navigate. World Finance speaks to Mohammad Attiya, President of TradeNet – a leading equity order management company based in Saudi Arabia – to discuss how to succeed in the area.

World Finance: Well Mohammad you’re a leading provider of equity trading services to emerging markets. So what advice would you give traders who are approaching these markets for the first time, what should they really look out for?
Mohammad Attiya: The nature of trading in emerging markets that we operate in are more retail than institutional, so a lot of retail activities, most customers are individuals who are trying to get rich fast. The volume of retail based trading exceeds 95 percent, and that requires certain ways of dealing with the customers that are not typical to the mature markets.

The other difference is the size of the market and the effect rumours do to this size of the market. The markets are small, and a small rumour can make a big huge change to the market, and that makes the nature of investors more speculators than investors if I may say.

Our system offers multiple rulebooks

World Finance: Well you supply direct access to many Middle Eastern stock markets, so what trends are you currently seeing there?
Mohammad Attiya: Two major trends. The increased footprint of institution investors. We see institutional investors coming into the markets. The other one is the demand by customers to have a single portfolio that they can trade in multiple markets, so they go outside of their traditional comfort zone of just the local market.

World Finance: Well Islamic financial services are also gaining ground, so what do you offer in terms of financial brokerage services?
Mohammad Attiya: The two main differences between Islamic based or sharia compliant brokerage and traditional brokerage is what you buy and how you finance it. What you buy depends on the rulebook that you follow. Our system offers multiple rulebooks. You can define the rulebook that you want to buy according to, so which rulebook is simply a set of criteria to define if a certain stock is sharia compliant or not based on the activity of that company. So for example, companies that deal in alcohol are not sharia compliant.

The other aspect of Islamic brokerage is how you actually give a margin, or how you finance the purchase. There are number of transactions that you have to do in order to finance a purchase or sale of a stock, and we provide support for these different types of transactions to support sharia compliance trading.

World Finance: So for those who are new to Islamic finance, how would you suggest they approach it?

Mohammad Attiya: First you need to know the rules. There is unfortunately no single way of knowing, or single book to read from, or single opinion to listen to, so you need to do a bit of education to yourself as a brokerage company and then implement those principles in your technology platform, or take a platform that can support this.

World Finance: Well finally, what are Tradenet’s plans for future growth?
Mohammad Attiya: Tradenent is focusing on what we see as the main trends in brokerage now, which are mobility, and the use of information. Mobility is not just mobile applications or being able to trade from my mobile. It’s like the move from wired to a wireless environment. Now you move from a core location to dislocated teams. By that I mean yes, the customer can trade online, or from his mobile, but also the broker can do his work from a tablet. The compliance officer can track what’s going on while he’s on the move, so it’s basically moving the whole brokerage industry mobile.

Tradenent is focusing on what we see as the main trends in brokerage now, which are mobility, and the use of information

The other aspect that we see is happening is, if you watch the World Cup, in the past the only piece of information that mattered in a match was the score. Then it developed into how many goals did they miss? But now you see at the end of each half time, you see information like who ran how much, who possessed the ball how much, and who did the proper passes. So this information has always been there. It was not shared and it was not required by customers even. When TV channels started showing these, they got more audience.

The same with brokerage. If you give the customer information that you already have, like your trading today is falling within ten percent of your risk profile in general, of your peer groups, what you are investing in is different from what others are investing in. Without giving information that the regulator will not allow to give, summarised information with grouped information, so I know more about myself with the information that the brokerage company already has.

World Finance: Mohammad thank you.
Mohammad Attiya: Thank you very much.