Trading platforms / social trading platforms / signal following
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.
Attitude of the country towards trading, social trading or signalling platforms
The acceptance of trading platforms, social trading platforms and signal following platforms is growing, although a high percentage of people either still don’t know these services or don’t use them.
During the Covid-19 pandemic, several million Austrians have become shareholders for the first time. Many Austrians are using online broker trading platforms like flatex to purchase and sell primarily stocks or ETFs.
The acceptance of trading platforms has increased significantly during the last two years. Accordingly, the usage of social trading or signalling platforms has increased as well. However, among young people, the use of such FinTech platforms is higher than among the elderly population.
Obligations and requirements to provide trading, social trading or signalling platforms described above
In Austria, trading platforms, social trading platforms and signal following platforms are generally subject to an authorisation requirement as regulated in the Austrian Banking Act, the Austrian Trade Act, and the Austrian Securities Supervision Act. In addition, the EU-wide Regulation (EU) 2019/2033 on the prudential requirements of investment firms from 27 November 2019 (Investment Firms Regulation – "IFR") as well as anti-money laundering and data protection regulations are to be complied with.
A license is required to offer advisory services of the following kind: Portfolio management, investment broking and contract broking.
Big investment firms are required to hold an initial capital of at least EUR 750,000.00. Small and middle-sized Investment firms are required to hold an initial capital from EUR 75,000.00 to 150,000.00, depending on the business model. Additionally, investment firms must fulfil the own funds requirements.
A license is not required, where trading platforms, social trading platforms and signal following platforms are organised in a way that they don’t meet the requirements for investment or contract broking or portfolio management services.
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
As of 26 June 2021, the IFD and the IFR, which newly regulate the supervision of investment firms, are applicable. The regulation has to be applied since that day; the directive should have been transposed into Austrian law by then. However, an official draft does not yet exist. Although there is no draft law yet, it has already been communicated that no Austrian investment firm is to be classified in class 1. Accordingly, there are no Austrian investment firms which would be supervised like credit institutions.
Market size for trading, social trading or signalling platforms and biggest companies in this business area
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
ETF savings plans among trading platform customers are becoming more widespread, so lower order commissions are cutting into the trading platforms’ profits. Trading platforms therefore need to expand to continue to increase their profits.