By Ikuko Kitagawa
On the 29th floor of a skyscraper that towers over Tokyo’s busy Roppongi entertainment district, traders peer over screens displaying foreign exchange rates. Right outside their window, Tokyo Tower soars above the surrounding buildings.
Traders Securities Co., a securities company that specializes in online trading, recently opened Top Traders Square, a place designed for individual investors seeking a tranquil area to do business, as well as those seeking help in polishing their trading skills.
“We’re targeting people who are serious about making money, and I want such people to use our area to achieve their goal,” President Isao Kanamaru said.
The company charges from 70,000 yen to 100,000 yen a month for membership, which includes use of the area. Other than enjoying the Tokyo skyline from the lounge, members have free access to personal computers and telephones in addition to a range of financial magazines and newspapers.
While it may sound like a play area for the rich, according to the company it is much better than spending thousands of yen to learn about investing from books as members can gain hands-on trading experience, and the fee is small change for some top traders, who earn 2 million yen a month from the business.
The area is primarily designed for day traders–typically individual investors who speculate by opening and closing the same trade within one day’s session–and most of its customers are experienced traders.
“It’s hard to name good Japanese investors such as (U.S. investor) George Soros, but actually there are many skillful investors in Japan,” director Taizen Okuyama said.
The company hopes the space will become a place for information exchange, where trading novices can meet veterans and learn the best techniques to make money from the markets.
“Not very many securities companies will teach you how to invest. Instead, they might start doing business with you by saying, ‘We have products like this and that, would you like to buy them?’ Our company wants to provide a place for those interested in making money to learn how to invest and to manage risk,” Kanamaru said.
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Deregulation opened doors
Kanamaru got his chance when the Foreign Exchange and Foreign Trade Law was revised in 1998. The revision liberalized foreign exchange trading, which used to be monopolized by banks.
Kanamaru used to work for the then Daiwa Futures Co. (now Himawari Holdings Inc.), where he was in charge of overseas futures and foreign exchange trading.
“After the deregulation, we had to have a new business model, but the company I worked for was too big to keep up with the change, and we (Kanamaru and a dozen of his colleagues) decided to establish our own company,” he said.
Established in 1999, Traders Securities deals with trading in foreign exchange as well as in Nikkei 225 futures and options. The firm’s electronic display screens monitor prices in real time, while the company also introduced for the first time in the nation the Standard Portfolio Analysis of Risk, or SPAN, a margin calculation technique for futures positions.
Explaining the firm’s focus on individual investors, Kanamaru said, “Observing from the futures aspect, many securities firms are actively committed to private investors, and I thought focusing on individuals instead of corporations would be smart.”
The law revision also has opened up opportunities for individuals to pursue investment options overseas, instead of having to put up with the low interest rates on offer in Japanese banks, and provides them with an opportunity to finance their own retirements, without having to worry about national pension payments.
According to the firm, 70 percent of its customers trade online, and most of them are relatively young, with ages ranging between 30 to 50.
But while Traders Securities generally requires its customers to have had some trading experience before joining, it also teaches anyone willing to learn about the business.
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Education key
“Many elements, such as an old Japanese saying that money should be earned by the sweat of one’s brow and the typical hands-off approach to investing, make it difficult for Japanese to get involved in investing, I suppose,” Kanamaru said.
He said the education system was one of the main reasons Japanese were not good at investing.
“If you go to Western countries or even other Asian nations, industries and schools teach children about economics and the importance of finance. But Japan treats finance as a dodgy business,” Kanamaru said.
Children in other countries that live in cities with major stock exchanges start learning about finance while in primary school, but in Japan, only students who have studied economics at university are likely to develop an interest in finance, he said.
Yet despite such circumstances, Kanamaru said the amount of funds traded by individual investors in Japan had increased during the past few years to reach a comparable level to the United States.
“Japanese traders have become more up to date with the wide range of information. They understand the patterns and strategies of investing, while controlling the risks,” Kanamaru said.
At the same time, the infrastructure to support online trading has been established in the nation, and securities companies are putting more focus on online systems, making it easier for individual investors, he said.
But he noted that those investing overseas face higher risks due to time differences. Prices in foreign markets can change dramatically overnight while Japanese investors are sleeping, he said.
Nevertheless, Kanamaru said private investors in Japan had shifted from a pattern of long-term investing in stocks to obtain steady dividends and capital gain to more short-term trading, in which they profit from arbitrage–the simultaneous purchase and sale of similar commodities in different markets to take advantage of a price discrepancy.
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Controlling risk
While the risks are high, so are the gains.
“As long as you understand the risks and the trading methods, investment isn’t such a scary business,” Kanamaru said.
He said it was important for investors to decide how much they could afford to lose, even though it may be hard to swallow.
“If you lose, you tend to look at the price hoping that it’ll go up soon, but that’s the wrong idea,” Kanamaru said.
Kanamaru said his firm provided the basic philosophy of investing, in addition to offering sophisticated trading techniques for complicated products such as derivatives and futures.
While the legal revision gave his firm its opening, Kanamaru said it also allowed securities companies to offer more discounts to customers, with a resulting impact on profitability.
Under such circumstances, Traders Securities aims to gain credibility with customers through the facilities available at Top Traders Square, where members can improve their investing techniques.
“It would be nice to hear our users saying our firm helped them become good at investing, or they chose us to meet skilled traders,” Okuyama said.
The company hopes the area will become a school that produces skilled traders and investors.
Whether they become billionaires like Soros or not, Kanamaru’s firm is ready to help aspiring traders get a head start in the exciting world of investment.
Source: Daily Yomiuri
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