CBA Newsletter June 2021

Startingatsomepoint,perhapsaftertheGMEmania,moreteenagersareinterestedinstocktrading,readyto earnadozenofbucksinspeculation–atleasttheythinktheyare.Inadigitalerawhichsmartphonesare must-haveforyoungsters,tradingappscomeinhandyfortheinexperiencedtraders.Howdidonlinetradingapps defeattraditionalmethodsandstillmanagetomakeprofits?TheCurrentBusinessAffairsNewsletter(June Issue)ofTheBusinessStudents'Union,HKUSTSUistakingyouthroughthetradingenthusiasm. Gamechangerofthetradingindustry Theoverhauledconsumerstructure,includingmore efficientandyoungtraders,resultsinmorebargaining For a long time, stock trading has been a powerandinfluenceofindividualsinthemarket.Take brick-and-mortaractivity,whichmustfacecostssuch GME asanexample,themovementwassuccessful asrentalexpensesandoverheads.Similartomany mostlybecauseofthepromptresponsesfrom many industriesinthisdecade,stocktradingalsoadaptsin traders on the Internet,which were impossible theonlineplatform businessmodel,cuttingnecessary withoutconvenienttradingapps.Therefore,trading expenditures for offline shops by Internet appsfacilitategeneraltradingprocessesandchange infrastructures.Inthestockmarket,atinyreductionin themarketintoamoresensitiveonetoindividual commissionfeesbycuttingcostscanalreadyproduce stockinvestors. greatadvantagesoveryourcompetitors,thusmany new entrantsoftradingindustryarejumpingonthe Incompatibilitywithtechnology tradingappbandwagon,drivingofflinetradingshops outofthemarket.Notonlydo tradingappslure Applicationscanreplacebrokerswithhighefficiency existingtraders,buttheyalsoappealtoinexperienced andconvenience,butitisnotasaccountableasan traders,usuallycuriousteenagerswhoareusedto employeeiswhenundesirableaccidentshappen.Oneof electronic gadgets and online applications. The thelargesttradingplatforms,Robinhood,wasdownfor efficiencyofbuyingand sellingstocksusingapps twodaysinMarchlastyear,whilestocksweregyrating effectivelydispelsthefearsanddoubtsofdangerous inthemarket.Mostofitscustomershadnocontrolover tradingforteenagers,aseverythingisafew clicks theiraccountsandsufferedhugelosses,someeven away.Theideaofparticipatinginthegameoftherich reachedamilliondollars,evaporatedovernight.Noone and narrowing the income gap also encourages couldhaveexpectedtheservertofail–Robinhoodand teenagerstotryinvesting,gettingbackthewealththat anytradingappswouldsay– andnowherecanthe victimsseekrestitution. theyoungdeserve. Sources:JemimaKelly.“When‘commission-freetrading’isn’t(really)free”.FinancialTimes,20February2020, www.ft.com/content/2c308470-e8b7-40e3-bcd4-d9d4696233b4 NathanielPopper.“RobinhoodHasLuredYoungTraders,SometimesWithDevastatingResults”.TheNewYorkTimes,8July2020, www.nytimes.com/2020/07/08/technology/robinhood-risky-trading.html IrisOuyang.“TencentalumnusaimstoturnFutuintoChina’sCharlesSchwab,evenasitlandsinRobinhood’s‘NerdvsWallStreet’battle”.SouthChina MorningPost,20February2021,www.scmp.com/business/companies/article/3122095/tencent-alumnus-aims-turn-futu-chinas-charles-schwab-even-it

Technicalproblemscanappearinallforms.Accordingto Commission-freecomeswithaprice TheNewYorkTimes,inJune2020,acollegestudentin Nebraskanamed AlexKearnskilled himselfafterhe A factor that concerns many young traders is loggedintotheappandsawthathisbalancehaddropped commission fees. Some trading apps, such as tonegative$730,000.Thefigurewashighpartlybecause Robinhood,E-tradeandSchwab,promotethemselves ofsomeincompletetrades.Aretheappdeveloperstotally as commission-free apps while still making notresponsibleforsystem failures?Perhapstheyhave considerableprofits.Thereasonbehindisthatthey investedalotinthebestinfrastructures,butthereisstill sell order flow from customers.“Each time a awideand dangerousgap between safetradingand Robinhood customer trades, Wall Street firms investingapps,whichdeveloperswillnottellusersuntil actuallybuyorsellthesharesanddeterminewhat theyfallforit. pricethecustomergets.ThesefirmspayRobinhood fortherighttodothis,becausetheythenengageina Playgroundindisguise form ofarbitragebytryingtobuyorsellthestockfor aprofitoverwhattheygivetheRobinhoodcustomer,” Theground-breakingsimplicityoftradingappsquickly explainedbyTheNewYorkTimes.Tradingappshave attractsmanyyounguserstotryinvesting,skippingall beenthelargestwinnerfrom thebeginning. thebasictrainingofadeliberateinvestorshouldhave gonethrough.Mostofthetradingappsonlyrequire Thereisnoreturn thousandsofdollarstostarttrading,whichisarelatively lowthresholdforinexperiencedtraderstogetatasteof Althoughtradingappsstillappeartobeproblematic, “freemoney”.Withoutpriorknowledgeofrisksand the trend of digitalised trading is irreversible. returnsofdifferentfinancialproducts,thesefreshtraders Traditionaltradingisgoingtobereplaced.Atthe areinfactexposedtounawarepotentialhugelosses. currentstagewhenthistechnologyisbeingpushedto theenvelope,weshould becarefuland awareto Tradingappsprovidealmostseamlessservicesthata dangeroustrapsinapps.Beforeyoulearntogainin tradereverneeded.Stockinformation,marketpriceand trade,firstavoidlossesduetomercilesstechnical tradeoptionsarepackedintothesamepage,makinga issues. decisioninbuyingastockseem soeasyandcasual,like everyone commentson WallStreetBets.ForeToro,a YourFeedback…… commission-free trading app,one-time leverage and five-times leverage are causally puttogether,where YourfeedbackwillhelpalottoimproveourCBA warnings are coloured in grey, scaled down and Newsletter,ifyouhaveanyenquiriesorsuggestions, positionedatthebottom ofthepage.Toabeginner, please do nothesitate to contactThe Executive tradingwithappsisjustlikeaneasygameifyoudonot Committee of the Union through email by understandthehugedifferenceinrisksbetweenthetwo [email protected],orby mailto Mailbox #15,LG5 leverageoptions,exceptitisnot. StudentAmenities,The Hong Kong University of ScienceandTechnology,ClearWaterBay,Kowloon, HK.