‘We’re targeting HNI investors’

Saxo Financial Services , the Indian subsidiary of Danish online investment bank Saxo Bank , announced its entry in India earlier this year, offering an opportunity to Indian ‘high net worth’ investors to invest in global financial instruments.

Online trading platforms work with more than 30 exchanges worldwide and have more than 30,000 products.

The 20-year-old Saxo’s USP is its advanced and user-friendly trading platform. Its individual clients are, typically, high net worth individuals who are self-directed traders or heads of family offices. Its institutional clients are hedge funds, corporate treasuries and family offices.

Managing DirectorRudra Dalmia, in a telephonic interview explains Saxo’s detailed plans for India and the rationale for Indians to invest in equities abroad.

He is apprehensive that the recently introduced controls on capital outflows will dampen HNI sentiment. Excerpts:

What is your take on the latest RBI measures on capital controls?

The central bank has reduced the limit for overseas direct investment by direct companies under automatic route from 400 per cent of the net worth to 100 per cent. It has also reduced the limit for remittances made by resident individuals under the liberalised remittances scheme (LRS) from $200,000 to $75,000 a year.

According to me, these are temporary measures. However, HNIs are shaken psychologically and want to pull out the money as quickly as possible. It is affecting the freedom of investment of individuals.

At a time when the whole world is earning returns in the US markets, Indians are restricted and will miss out. These are poor and retrograde measures, which will not help them arrest rupee slide. The Government should plug the hole elsewhere.

Who are your competitors here?

A lot of our global competitors are in India, or are planning to enter India at some point.

Saxo operates in partnership with a lot of its peers and competitors such as Citibank and Barclays globally.

For example, Citibank uses our foreign exchange platform as a white label and is branded Citi FXPro wherein our technology engine powers the trading for Citi’s clients.

In India, we will operate on a similar white labelling strategy with reputed partners.

Will you succeed here when only 2-3 per cent of the population invests in equities? Even among them, not many actively follow equity markets.

Well, 2-3 per cent of the population is 25-35 million people. That is more than the population of Belgium, Norway, Denmark, Sweden, Finland and the Netherlands combined.

The idea is not to target volumes but to work with HNI investors who understand their trading requirements and need an efficient and broad-based platform that is easy to use.

We would be happy if we have 1,00,000 clients in South Asia in three years. We believe the number is achievable, subject to macro-economic conditions.

Why should Indians invest in overseas markets when they do not understand the political, economic and currency risks involved?

I don’t think many Indians can claim to understand the complexities of Indian politics, the economy and currency.

Those who do are geniuses I guess, I certainly don’t. I do believe that the US is an easier market to understand with more transparency, less dependence on policy and less currency risk than the rupee, as the last few months have shown.

Will it not be better investing in overseas offshore funds?

If you mean exchange traded funds and mutual funds, the answer is yes. All investors who do not follow markets and are not very knowledgeable should invest using MFs and ETFs. Saxo Bank offers this option on the platform as well.

Will investments be in rupees, or the currency of the country where it is listed or the dollar?

According to the liberalised remittance scheme of the RBI, Indian residents are allowed to invest up to $2,00,000 every year.

The investment is done in the currency of the exchange and will be converted from the currency of the bank account holding the investor wealth. It will not be in rupees.

How long will investors have to wait for shares to come to the account?

Trade cycles differ from exchange to exchange but normally its t+1/2/3 days depending on the product and country of trade.

And the custodian of shares bought by Indians will be Citibank.

Do you provide research support to investors?

We have relationships with many research providers and our customers can use the research available on our platform. In addition, Saxo Bank publishes a trader’s blog called www.tradingfloor.com which is a repository of information and knowledge and has a huge following among investors and professional traders who publish their opinions on securities, economic events and financial results.

Can an individual buy ADRs/GDRs/IDRs of companies and benefit if there is an arbitrage opportunity?

ADRs/IDRs /GDRs (American depository receipts, Indian depository receipts and global depository receipts) are like any other security and are available on our platform. If an investor believes there is an opportunity, he/she can definitely trade the same on any exchange that we offer.

What would be the trading cost to purchase equity in an overseas markets? Say, if someone wants to buy 100 Apple shares ?

Brokerage charges vary from exchange to exchange, product to product, and client profile to client profile.

For a low frequency UK trader who buys Apple stock on Nasdaq, the cost of trade would be 100 x $448 (price) = $44,800 and brokerage would be $0.02 per share or $2 with a minimum charge of $15 for the trade which equals 3 basis points on the total value of $44,800.

For a high frequency UK trader, it would be $2 or 0.004 per cent or 0.4 basis points.

These examples are based on Apple’s prices on July 30. Our pricing also depends on how the white label partner decides to price the product for their customers, but we have the same pricing policy for our global clients.

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