Name
Global FinTech Guide
Country _ Name
Australia
SectionTitle
Trading platforms/social trading platforms/signal following
Body
FinTechs belonging to this category operate trading platforms or online marketplaces for investment opportunities or certain financial contracts – e.g. securities, factoring etc. and sometimes furthermore provide contact to financial experts and tools for the decision-making.

FinTech-signalling and social trading platforms provide users with the opportunity to exchange opinions on financial investments and offer signal providers and traders the possibility to make their securities portfolio publicly visible. This way the portfolios can be linked to and followed by other traders via the platform automatically, so that the trading and investment strategy of the followed traders can be copied.

The platform often cooperates with a financial services provider or a credit institution where both the trader and the follower hold their securities accounts, and which execute the orders both of the trader and the follower and to which the platform passes on the trading decisions.

Introduction

Attitude of the country towards trading, social trading or signalling platforms

Given the relative inexperience of investors currently on the market, with 400,000 Australians commencing trading during the COVID-19 pandemic in Australia, FinTechs such as social trading platforms and signal following have become progressively more popular amongst traders. It has allowed more casual investors to enter the market as they are not required to commit so much time in researching prior to making their investments.

There has been understandable hesitancy in trusting an unknown or new FinTech business. However, as this form of trading has become more popular, it has alleviated some of those fears and it is becoming a more acceptable way to make investments.

Legal affairs

Obligations and requirements to provide trading, social trading or signalling platforms described above

A social trading service is providing advice on investments and is subject to the requirements of a financial advisor. Social traders must comply with all existing laws and regulations for financial services. This includes holding an AFSL and complying with the following legislation, regulatory bodies, and obligations:
  • Corporations Act (Cth);
  • Common law Obligations;
  • Australian Consumer Law;
  • Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth) (AML/CTF Act) and Anti-Money Laundering and Counter-Terrorism Financing Rules Instrument 2007 (No.1) (AML/CTF Rules);
  • APRA;
  • ASIC; and
  • AUSTRAC.


Additional comments regarding the legal situation for trading, social trading or signalling platforms or what FinTech’s must be aware of in this business area

It is likely that further regulations relating to social trading will not be introduced in the short to medium term with the government focusing on legal reform and further regulation within other areas of FinTech. The Australian Treasury has flagged in December 2021 that the short-term plan within the FinTech regulatory space would focus on crypto and payment systems. The treasury committed to having this in place by mid-2022.

Economic conditions

Market size for trading, social trading or signalling platforms and biggest companies in this business area

The Australian Securities Exchange estimates that 9 million people hold investments outside of their superannuation in 2021. Trading is a very popular form of investing amongst the Australian public with 1.25 million partaking in online trading. Over 400,000 of those placed their first trade on the share market in 2020. The share market is growing particularly amongst younger Australians with 18% of new investors younger than 25 years of age, and 49% between the ages of 25-39. Major social trading businesses in Australia include eToro and Pepperstone.

Additional comments regarding the economic situation for trading, social trading or signalling platforms or what FinTech’s must be aware of in this business area

With Tiger Brokers establishing a $0 brokerage mobile-based trading platform in Australia, this may see more Australians commence trading with greater access to the market. Further, the more traders there are, the greater opportunity there is in the social trading and signalling market.

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