A Tokyo-based securities house that posted first-half operating revenue of just 10 billion yen happens to be one of the nation’s strongest brokerages, as its profit margin was 50 percent.
Matsui Securities Co.’s nearly 5 billion yen profit reflects a margin much higher than those of the nation’s major securities houses.
Nomura Securities Co., the biggest, posted a group pretax profit of 159 billion yen, about 28 percent of its 573 billion yen revenue for the fiscal 2003 first half.
Matsui Securities credits its organizational efficiency to its focus on online trading targeting individual investors.
“About 71 percent of individual investors are using online margin trading services offered by about 60 securities houses nationwide,” said Masashi Watanabe, manager of Matsui’s corporate planning.
Online-trading brokerages have attracted individual customers by offering lower commission charges than ordinary securities houses. Matsui claims the highest profits in the online-trading business.
Matsui on average charges a 0.14 percent commission, whereas ordinary securities houses’ commissions average 0.8 percent for a 3 million yen transaction, Watanabe noted.
“Many customers of our online-trading services are middle-aged or older investors who have been actively trading stock,” he said.
Customers of other online-trading companies are in many cases Internet newcomers with little securities trading experience, and thus the turnout is lower, Watanabe explained.
Matsui, which started online trading in May 1998 ahead of its rivals, enjoys the image of being a front-runner, he said, noting others didn’t jump onto the bandwagon until October 1999, when deregulation of stock commissions created an environment conducive to such services.
Matsui was already one step ahead in terms of accumulated online-trading knowhow by the time commissions were deregulated, and thus has attracted more active traders, Watanabe said.
“Our president, Michio Matsui, steered the company to the online-securities business because he was constantly trying to reduce sales costs,” he said.
The firm, for example, stopped using contract-based sales staff who could also represent other brokerages and created a call center in 1992 using part-timers when it launched its online service, thus avoiding internal opposition from its core, unionized employees.
In the process of lowering costs, Matsui has developed new services, including online margin trading, which allows customers to hold stock without setting a settlement deadline. Other brokerages have a six-month deadline for settling online margin trading.
With the new service, which started in July, Matsui has freed investors from having to adhere to the deadline and thus being forced to sell stock whose value is declining, Watanabe said. This at one time attracted over 60 billion yen, or nearly one-third of the firm’s ordinary trading revenue.
For the trading service, Matsui has issued corporate bonds amounting to nearly 60 billion yen, including 40 billion yen in convertible bonds, because Japan Securities Finance Co., which offers brokerages funds for margin trading, has hesitated to lend funds to the company because of concerns about settlements that lack a fixed date.
Watanabe agreed that additional financial resources are necessary to launch the new service, but added: “Securities houses, which had conducted business under regulations, are tied up with fixed ideas. The six-month deadline is not a rule, but none had launched this kind of service.”
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