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 and has been growing, especially since the Covid-19 pandemic. Many Czechs started looking for opportunities on how to invest the accumulated funds and started using different investment platforms such as Portu or Fondee (investments into securities, bonds etc.), Bondster or Zonky (investments via participation on credit), Roger (investments into claims/factoring) and others. The acceptance of trading platforms has increased significantly during the Covid-19 pandemic.
On the other hand, we do not observe any significant usage of social trading or signalling platforms.
Obligations and requirements to provide trading, social trading or signalling platforms described above
Depending on the business model, the trading, social trading or signalling platforms may fall under the scope of investment services – as is the case with above-mentioned asset and portfolio management services and financial advisory and broking services.
Therefore, as before, regulation in the area of investment services applies to bank and non-bank securities brokers (including non-EEA branches), investment intermediaries and tied agents of securities brokers and investment intermediaries.
A securities trader's license is required for the provision of investment services, i.e. the receipt and transmission of orders relating to investment instruments, the execution of orders relating to investment instruments on behalf of a client, trading in investment instruments on own account, the management of client assets, investment advisory services, the operation of a multilateral or organised trading facility and other services listed in the Act on Capital Market Business or European regulations.
A license is required for asset managers associated with investment instruments (asset or wealth management). There are several categories of securities broker (OCP) licenses and the complexity of the licensing process at the CNB depends on these categories: (i) OCP with full license and the ability to receive customer assets (initial capital EUR 730.000), (ii) OCP with the limited license and the ability to receive the deposit. (iii) an OCP with a license without the possibility to receive customer assets (initial capital EUR 50,000), the execution of this version of the OCP being in practice relatively the least complex.
The costs of a licensing procedure include the administrative fee (up to CZK 200,000, i.e. approx. EUR 8,000) and additional legal and other associated costs of up to dozens of thousands of euros, depending on the license type and on which and how many types of investment services the license is supposed to cover.
Funds and investment instruments entrusted by the customer to the company are, in accordance with the Act on Capital Market Business (256/2004 Coll.) subject to the guaranteed system provided by the Guarantee Fund. The Guarantee Fund shall provide compensation in the amount and under the conditions set out in the Act on Capital Market Business, but not exceeding the amount corresponding to EUR 20.000.
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
Market size for trading, social trading or signalling platforms and biggest companies in this business area
Unfortunately, there is no statistical data covering specifically the market/sector of trading, social trading, or signalling platforms. However, since the Covid-19 pandemic, in general, all types of investment platforms have reported growth in the number of customers as well as in funds invested through them.
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
As mentioned above, the popularity of investing through trading platforms has been growing. One of the reasons is that trading platforms are becoming more and more accessible to the general public due to lower fees and lower requirements for initial investment.