MarketWall B2B Solution Attractive to Brokers and Trading Apps
Sophic Capital’s AnalytixInsight’s MarketWall at the Confluence of Emerging Fintech Trends report detailed:
- the fallout from the Reddit WallStreetBets / GameStop saga;
- how some retail investors traded without proper guardrails and lost money, and;
- how Robinhood endured Congressional and SEC scrutiny.
Our report also disclosed extensive capital markets activity in the Fintech sector.
In this report, we highlight:
- Recent industry developments, which include increased retail investor participation;
- Increased attention by governments and regulatory bodies globally to protect retail investors’ interests;
- AnalytixInsight’s strong positioning leveraging its machine-driven investment research to empower retail investors as they become more active investors;
- MarketWall (49% owned by AnalytixInsight Inc.) developments, which include making its platform available to other financial institutions and just announced regulatory approval for MarketWall’s European online financial broker, InvestoPro.
These events should significantly improve AnalytixInsight’s positioning with retail investors, which could drive potential long-term upside in the share price of AnalytixInsight Inc. [OTC:ATIXF, TSXV:ALY] , which we will examine in a subsequent report.
Active Retail Investor Trading is Increasing
The retail investor sideshow of 2020 and 2021 demonstrated the power of this group to collectively move markets (Exhibit 1). With everyone stuck at home during the pandemic, retail investors opened investing/trading accounts at a record pace. Fidelity’s retail base grew 17% year-over-year in 2020 to 26 million. TD Ameritrade opened a record 661,000 retail accounts in the second quarter of 2020. While Interactive Brokers opened 867,000 accounts during the same period. In the fallout of the Reddit WallStreetBets / GameStop saga, when Robinhood limited trading, Webull claimed new account signups were 1,548% higher than its seven-day average. The company further stated that it was receiving an average of 850 daily account transfers at the end of 2020 and estimated that about half came from Robinhood. Recent estimates suggest retail investors are responsible for 23% of all U.S. equity volume versus 20% in 2020 (Exhibit 2). This activity is truly staggering and is unlike any we have witnessed in our investment careers, except perhaps during the dot-com bubble. Recently, we have seen the increased retail interest manifest itself across Canadian small-cap and micro cap stocks as well, including a significant uptick in the level of activity on the Analytixinsight Stockhouse board.
Then consider that of the US$1.9 trillion American’s recently received in stimulus, up to US$170 billion could flow into stocks, potentially driving even more retail activity. In anticipation of this next wave of retail investor activity, banks and brokers are offering new products and services. Most recently, Goldman Sachs announced it will be launching a digital wealth-management platform that allocates and rebalances clients’ stocks and bonds based upon internal models. Clients can open accounts with a minimum of US$1,000.
“Stocks Only Go Up” (Until They Don’t)
We detailed the fallout of the Reddit WallStreetBets / GameStop saga in our AnalytixInsight’s MarketWall at the Confluence of Emerging Fintech Trends report. Robinhood’s CEO Vlaad Tenev was called to testify before a U.S. Congressional hearing, where he rejected the allegation of gamifying investing. Tenev argued that Robinhood had democratized investing by making it more accessible to the masses. Critics claimed that Robinhood took advantage of young and inexperienced traders, rewarding them with free gifts and rewards from referrals.
Scrutiny carried over to the Securities and Exchange Commission (“SEC”). SEC Chair Allison Herren Lee mailed Senator Elizabeth Warren, detailing rule changes that the regulator should “seriously consider” to address the challenges of modern markets: “the Commission has always remained focused on whether investors have access to sufficient information to make informed investment decisions.” The of European Securities and Markets Authority (“EMSA”) joined in, issuing a statement urging “retail investors to be careful when taking investment decisions based exclusively on information from social media and other unregulated online platforms, if they cannot verify the reliability and quality of that information. A key step for any investor before making an investment decision is to gather investment information from reliable sources, while keeping in mind one’s investment objectives, the benefits of diversification and the ability to bear losses.”
Empowering investors to make informed decisions should not only be U.S.-specific. Typically risk-averse Europeans have also piled into equities. For example, the number of Germans who own shares directly or through funds rose from 2.2 million in 2019 to 12.4 million, according to a March 1, 2021 FT.com article. The number of Dutch households holding shares directly or via funds rose 17% year-over-year in 2020 to 1.75 million. About 1.34 million French bought at least one share in 2020, and 400,000 of them had not done so since 2018.
With the increase in equity investing by European investors, Europe’s regulator is scrutinizing the increase in low-/zero-commission platforms. Attracted by low commissions, hundreds of thousands of European customers have flocked to Trade Republic in Germany, the Netherlands’ Bux, Trading 212 from the U.K. and even Israel’s eToro. Steven Maijoor, the EMSA’s Chair, wrote to Members of the European Parliament about concerns regarding “the gamificationof investing, potentially impacting retail investors’ risk awareness and contributing to the popularity of leveraged trading strategies.“
This trend is impacting Canadian investors as well, and Canadian regulators are paying attention. According to Investor Economics, a financial services research firm, Canadians opened more than 2.3 million gross new accounts in Canada between January and December 2020 — up from 846,000 in all of 2019. Since the start of the pandemic, there has also been a significant surge in inquiries and complaints to IIROC’s Complaints & Inquiries team. Between March 2020 and January 2021, DIY investor inquiries and complaints increased 270% compared to the same period in 2019. In response, IIROC, the pan-Canadian regulator, issued a joint statement urging investors to be careful about sources of information they use when making investment decisions.
AnalytixInsight’s MarketWall Solution Addresses Core Retail Trading Challenges
Educating investors is a formidable and uneconomical task for brokers. For example, recently, the Financial Times reported that investment reports for Morningstar (the research house that helps investors choose among thousands of mutual and exchange traded funds) would be machine created. These machine-generated reports that began rolling out this week set out the rationale behind Morningstar’s so-called analyst rating on a fund, which run through gold, silver and bronze to neutral or negative. The ratings, similar to Wall Street buy or sell recommendations, are separate from Morningstar’s more famous star ratings system, which just measures funds’ past performance. Robots were already being used to generate the analyst rating itself on thousands of smaller funds. Morningstar said last week that the robot ratings have performed as well as the recommendations generated by human analysts, based on three years of data. Algorithmic ratings, which Morningstar has been generating since June 2017, are meant to mimic the firm’s human analysts by considering the same factors, such as a fund’s fees, management turnover, track record and portfolio risks.
AnalytixInsight is at the forefront of machine generated investment research. Sophic Capital’s AnalytixInsight AI/ML Financial Services Platform report highlighted why investment research is under pressure, especially when it comes to equity research coverage for small- and micro-cap stocks. In the report, we detailed AnalytixInsight’s CapitalCube, an artificial intelligence/machine learning (“AI/ML”) solution providing comprehensive machine-generated company analysis on over 50,000 global equities and North American ETFs.
MarketWall is a 49%-owned Fintech subsidiary that AnalytixInsight co-owns with Italian bank Intesa Sanpaolo that develops stock trading and research solutions as part of a fully integrated ecosystem. MarketWall has developed InvestoPro which is MarketWall’s 100%-owned digital discount brokerage subsidiary. MarketWall also developed the Investo app for Intesa Sanpaolo, which forms part of the bank’s mobile banking app constellation. That banking app constellation is used by over six million Intesa Sanpaolo customers.
So why is MarketWall important as it relates to recent retail investing/trading activity? MarketWall offers CapitalCube’s AI/ML driven research and analysis, allowing investors an opportunity to conduct due diligence before transacting. To accelerate support adoption, MarketWall recently launched GEMINA, a white label B2B trading platform designed to support banks and brokers in their digital trading transformation. The multi-device trading platform provides quotes, charts, data, research content and tools, and more. It is offered as a cloud service (built on Mircosoft Azure) or on-premise.
Investors Should Pay Attention To AnalytixInsight Now
MarketWall has proven that it can implement GEMINA for bank-scale applications. The company has already successfully deployed GEMINA-based solutions for two leading European banks. GEMINA also powers MarketWall’s online financial portal, InvestoPro.com, which will become the European online financial broker following the launch of InvestoPro.
MarketWall’s announcement of regulatory approvals for its InvestoPro European online financial broker is a major catalyst for AnalytixInsight. On March 29, 2021, the Company announced its Fintech affiliate, MarketWall, has received regulatory approval from CONSOB, the Italian financial markets regulator, for its European online financial broker InvestoPro. As a result, InvestoPro will allow its users to trade stocks, options, and derivatives, in Italy and other European countries. InvestoPro has been designed as a low-fee stock trading and analysis platform that offers financial analysis, news, research, and investor education content, to equip retail investors with investing tools. Recall, Intesa Sanpaolo owns 33% of MarketWall, and with approximately 11.8 million customers and approximately 3,700 branches throughout Italy, is one of the top banking groups in Europe. Intesa Sanpaolo is also investing €2.8 billion in a strategic plan to increase the bank’s digitized business to 70%, with mobile being at the heart of the digital ecosystem. InvestoPro currently has an audience of over 2.5 million monthly users views through its financial information portal InvestoPro.com. Additionally, as a Samsung Electronics partner, MarketWall’s financial apps are preloaded on certain Samsung devices in Europe. These initiatives contribute to InvestoPro’s consumer brand awareness in Europe and will benefit its launch.
These events should significantly improve AnalytixInsight’s positioning with retail investors, which could drive potential long-term upside in the value of the AnalytixInsight stock, which we will examine in a subsequent report.
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