The Gamestop saga of 2021 marked one of the biggest David vs Goliath moments in the global stock market history — when retail investors on the Reddit forum r/WallStreetBets banded together to drive the stock price of Gamestop up, causing a major headache for the short-sellers banking on the stock falling.
From that, a big lesson materialised: the emerging class of retail investors using digital platforms to trade presented a big opportunity for trading platforms to cater to. US trading platform Robinhood was the name attached to the saga, and it, along with other brokerages, was afflicted by outages during the frenzy and buckled under higher-than-usual traffic.
Meanwhile, online brokerage Webull continues to boast that it had no trouble operating throughout the whole mania. Founded in 2016 initially as a market data platform, Webull has over 500 engineers in its research and development centre in Changsha, China, and operates on cloud technology. Its army of engineers and developers has played an integral role in ensuring technical continuity of its platform since its inception.
Webull pivoted to become a global brokerage firm catering to retail investors in 2018 when it noticed a growing demand and awareness in trading among the group. Webull is headquartered in Florida and subject to US regulations. It was previously owned by Chinese holding company Fumi Technology, Shunwei Capital.
Bernard Teo, Webull Singapore's CEO says: "Our whole movement is to democratise finance." Photo: Webull
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“Before us, few investment platforms focused on customers who only had $1,000–$3,000 [to invest]; other platforms weren’t interested if you didn’t have $50,000 or $100,000,” says Webull Singapore CEO Bernard Teo in an interview with The Edge Singapore. “Our whole movement is to democratise finance.”
Today, Webull has over 20 million users globally in over 190 countries. It is licensed in eight regions, with no minimum deposit requirements, zero commission and zero fees.
Last May, Webull Singapore began its operations under Teo, who saw the country as a key piece of the business due to its highly educated population and competitive market. As at July, Webull Singapore has over 300,000 registered users, with more than a third of the users with capital in their accounts.
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However, one year on, Webull Singapore’s business is still unprofitable, something Teo anticipated due to its lack of presence in the region from the get-go.
As the trading platform is now in the growth phase to win over more customers and market share, it has since spent a portion of their revenue on onboarding clients. Beyond the increase in sign-ups from 50,000 at launch to 300,000 today, Teo and his team have observed several trends among the retail investors in Singapore.
Leveraging on options
Unsurprisingly, Teo says that most of Webull Singapore’s local investors are interested in US securities. Unlike local trading platforms that facilitate trading through a third-party broker, Webull has its own affiliate, which allows it to keep its trading costs low.
In Singapore, 84% of Webull clients have assets in US markets, while 6% have assets in Hong Kong markets. With 80% of Webull’s clients under the age of 45, Teo notes that this younger generation “wants to buy what they use”, including Meta, which owns Facebook, and Tesla, the leading EV maker.
In particular, trading options has grown in popularity among Singaporen investors, according to Teo. This allows them to take on a more leveraged position, as a smaller amount of capital can potentially result in higher profits. From December 2022 to June, Webull Singapore saw a 60% increase in the number of option trades. It also saw a 100% increase in the number of option orders per account which traded options, from 31 to 73 option orders.
“It’s more exciting to trade options because sometimes ordinary stocks only move 10%,” says Teo. “But options allow you to make up to 10 or 20 times your bet, which is an exciting investing experience.”
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Trading options is not a new investment product. What Webull has noticed was a greater awareness among retail investors due to the advent of social media in bringing conversations about investment to the fore during the pandemic.
Now, given how option trading is typically seen as a riskier investment activity, Webull is careful to follow guidelines set by the Monetary Authority of Singapore (MAS) on who is allowed to trade options. This includes having investors disclose how many trades they have conducted, or completing certain investor education courses.
As a regulated entity that holds a Capital Markets Services (CMS) licence under the Securities and Futures Act 2001 in Singapore, Teo says that the protection of investors is important to them.
During this market downturn that started last year, Teo notes that Webull Singapore’s clients lost a significant amount of their capital when their investments turned sour. “Last year was a very tough year for retail investors,” he says. “We know that our clients lost a significant amount of their money, but they were still putting new money into our platform.”
This indicates to Teo that retail investors have not given up on trading, and that digital trading platforms like Webull still have value.
Regional growth
With every new market Webull enters, it offers a “two plus one” strategy. For example, its Singapore business is able to trade US, China and Hong Kong securities.
In the coming months, Webull Singapore will offer trading securities with companies listed on the Singapore Exchange (SGX). At present, trading of stocks listed on the SGX is not offered by Webull in Singapore due to a lack of perceived popularity among the younger generation, which make up a bulk of its investors.
But in the long term, Webull intends to diversify its product offerings and asset classes to retail investors, to give them choices in what they can invest in depending on what markets they are trading from.
While options and mutual funds are popular assets for Singaporean investors, Teo says that investors in each market have their own preferences on what kind of products to trade. For example, retail investors in Indonesia prefer investing in local fixed income and gold, observes Teo.
Webull’s revenue comprises a balance between option and stock trades, with 20% of its investors contributing to about 80% of its revenue. Its Singapore operations are currently not profitable, as a bulk of its expenditure is spent on customer acquisition.
In order to entice users to sign up, Webull offers investors in Singapore “free” fractional shares if they are a new entrant or user of the application. This allows these new users to try out trading for free before they commit to injecting their own capital to trade.
Teo’s objective is to encourage stickiness among retail investors, and to eventually turn a profit around in the next three to five years.
He also has set his eyes on building up the company’s network of institutional investors, who are the ones presumably generating a lot more trading volume — a strategy that other investment platforms have also adopted in the last few years.
“Would we be able to succeed? For a firm that was established only seven years ago, to become the second digital broker behind Robinhood and the seventh or eighth broker in the US — if we’re able to succeed in the deepest, most competitive capital market in the world [the US], we should be able to succeed in most markets in the world.” Teo says.
