Welcome back to another issue of the C-Suite, a once a month interview where we speak to senior executives from the retail trading industry. This time we’re speaking to Biyi Cheng, Country Head for Moomoo’s Australia entity.
If you aren’t familiar with Moomoo then you should be.
The company is massive in Asia and has over 20m customers globally. About 40% of all Hong Kong-ites and 25% of Singaporeans have an account with the company.
What are their plans for Australia?
Read on to find out
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Lots of people reading this will know you but can you give some background on yourself and how you ended up here at Moomoo?
Sure, I joined CMC Markets in 2005 as a dealer here in Sydney. In 2010, CMC wanted to move the dealing desk to Singapore so I moved to the City Index office here instead and ended up being Head of Dealing APAC there.
Then in 2015 there was a reshuffle at City Index after Gain Capital acquired the company. CMC asked if I wanted to rejoin but in a business development role, heading their commercial team for Greater China.
That was actually a career change because it was moving to a more client-facing role and growing the business, which was something I really enjoyed. It also meant I was based in Shanghai and I helped set up CMC’s local presence there in 2017.
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How did Moomoo get you to join?
After I moved back from Shanghai to Sydney, I was still at CMC and Moomoo approached me about the role at the end of last year. Actually I was hesitant at the beginning because it was switching industries, moving from CFDs to stockbroking, and I’ve been working for so long with CFDs.
But when I understood more about their plans, what the company’s vision and their intentions were, my mind started to change. Basically they want to build a mobile platform for everything. Today that’s every online trading firm’s dream.
The difference is Moomoo has a very strong technology base because of the way they can upgrade their platform. If we think an upgrade is necessary or important, we can upgrade it in a highly efficient manner.
How do you manage that?
Moomoo has about 2,000 engineers in their headquarters.
Wow. We’ll come back to that I’m sure. To clarify one thing, Moomoo was originally Futu, which has its own brand still, but is that based in the US or in China?
Futu is the parent company and I would say there are really two headquarters – one is in the US and the other is in Hong Kong. Futu has its own clearing house in the US as well.
Ok, and in Hong Kong Futu offers CFDs on FX – I know they call it leveraged FX there – do you have it elsewhere? Are there plans to expand it?
We do have a leveraged FX license in Hong Kong and also in Singapore. But for Moomoo it’s nothing, it’s a tiny piece of the business, and it’s not something we’re focused on. Everyone assumed I moved here to build up a CFD business but that wasn’t the case. It’s there if you want to trade it but it’s not a core part of what we want to do.
So there are no plans for CFDs at Moomoo AUS?
I can’t say ‘no’ as it could be a possibility in the future but it’s not at this stage.
Right, so what is the main ‘thing’ at the moment?
Stockbroking, so we offer US, Hong Kong, and Australian shares here at the moment, and also US stock options too.
And so given your background at CMC and so on, what did the company do to sell it to you, to get you to join?
The main thing the company wants is to make sure there is a more localised service here, so we’re catering our product to the local market. But there is also a need for balance. Futu has this East Asian background that I described and so when they come to a ‘western’ country like Australia, they want to make sure there is no culture shock, no conflicts with the local business culture. I’ve been on both ‘sides’ of this culture gap for a while, so the company saw me as a good fit, and also being in that position was an attractive option for me.
What are the immediate plans now?
The main thing is to expand the client base here and to build up our brand against the other competitors in the market. So that’s both traditional players and the newer fintechs, which we have a few of here in Australia.
One of the things that a lot of ‘fintech’ brokers have had is that they all competed on price and then struggled consequently to make money. So given the focus you have on that market, is that something you are concerned about?
That’s right, the stockbroking business means you can spend a lot of money and not see the same sort of revenues you would in CFDs. I’m not too worried here because Futu is big enough.
It’s listed, got a huge market cap, and the company has a very good market share in Hong Kong, Singapore, and Malaysia. In Hong Kong we are number one, we have 30% to 40% of all Hong Kong residents as clients. Singapore the office opened three years ago and we have started making a profit.
In Malaysia, we opened our office at the end of February of this year. After six weeks of doing business we had over 100k clients. Then you have clearing in the US and so on. So we are on solid ground financially and you can see that in our investor updates.
So basically Futu can fund you, like the Singapore office, until you hit profitability?
Yup, it means we have a solid base to compete here in the local market, even if there is a price war, so that’s the thinking of the company.
Looking at fintech type companies globally again, I’d say a mistake they made was to focus a lot on the tech product and less on financial products. Most retail money in stockbroking in the UK and in the US, for example, is in pension accounts and other kinds of tax efficient accounts. Is that the same here? Do you have plans to build something to cater to that audience?
For Australia, you have something called an SMSF – a self-managed superannuation
fund – so residents are able to manage their own pension fund. Moomoo offers SMSF accounts to Australian clients.
However, local clients would like more from that, such as the SMSF admin service, including setting up an SMSF. We have one competitor who is quite good at this but Moomoo currently doesn’t offer it. It’s something we’ll likely do.
But it’s also worth remembering that Australia is actually quite a small market. There are only 26m people but the competition is huge, in CFDs and in stockbroking. So that’s the question for us now – how do we make this kind of product stand out? And I think one answer is the platform and our technology. Another is customer service.
So if you call us then we immediately answer. There is no waiting for an hour like with a bank. We also have a good dealing team here, so for larger size orders, if there are any problems, the dealing team will call the client immediately.
You mentioned earlier that you had this thing where you can update the platform very quickly, how does that work?
This is something that I think is unique to Moomoo. So if a client says ‘you should have this feature’, that inquiry goes straight to the CEO. Our CEO has a technology background, he was at Tencent before. He will see that and if he approves it, we will do it.
Must be a busy man…
Yes but it goes back to the company’s roots in Hong Kong. Basically they had to ask themselves, can we come into this market and become the biggest player? And the way that they did that was the whole senior management was focused on client demands. The company is very client focused because of that.
And so if the client is asking for something and it’s reasonable, we’ll just do it. When I first joined I actually couldn’t believe it because I saw a single client inquiry go to the CEO and then they did the update that client wanted.
So let’s say I’m in Australia and make a request, what happens?
Each region has a group, which includes the CEO and IT head. If you send a request from Australia then the Australia group sees that and then we decide, ‘ok is it reasonable or is it not?’ Then we take things from there.
Changing topic – you mentioned you offer US options. Retail interest in trading options has gone up a lot over the last few years. So how has the launch gone?
We started offering US stock options in May because we had to get derivatives permissions from the regulator. The business growth has been pretty heavy. So I can see a significant change in the numbers every day.
My assumption was that options would be for a small base of more sophisticated investors. That is the case but what I didn’t appreciate was the volume they contribute overall. It is significant. Like other firms, we charge based on contracts traded. So there is more revenue there. Also we cannot promote options that much here in Australia, it’s like advertising CFDs, but what we saw was that, once we added them, our more sophisticated clients picked them up very quickly.
If you look at Robinhood in the US or similar companies, I’ve always thought they are basically options brokers in disguise. They use commission-free stocks as their marketing tool but the end goal is to convert into other products. Is that true for Moomoo as well?
Not exactly because we do charge commissions, small ones, first of all. But I think if you look at companies that have started up in stockbroking, they are all exploring avenues to make money. So some might focus on currency conversion, for example.
I think for Moomoo, we are in the same process, and you are always looking for ways to diversify your income streams. In Singapore, for example, we have wealth management for wealthier clients.
I also think as a company we focus a lot not just on active users, but registered users. And as I said, the vision is to be a place where you can do any kind of trading or investing. So if you have more products and tools, you always have the potential to generate more revenue from existing clients but also activate registered users who may not have actually invested with you.
Has it been difficult to make the switch from CFDs to stockbroking?
To be honest, before I joined, everyone said stockbroking would be boring. CFDs are exciting, right? You are facing the regulator, the clients, your LP, the markets – a lot is going on and there are also always different ways you can think of to make money.
Stockbroking is a more traditional business. And the thing that has been interesting to me is that you can have a big client base, good brand, good technology but not make money or not make enough money. And so how do you handle that?
For me, the positive of the CFD industry is that it makes you very entrepreneurial. You are always looking at a situation and thinking, ‘what can I do here to make more revenue or to reduce my costs?’ So it has been interesting to come with that mindset and then be presented with the revenue problems stockbroking has. It has made me appreciate that side of CFDs.
It’s also been fun because it has been a challenge, which I like. I have a personality where, if you tell me something is a dead end, I will keep doing everything until we make a profit. I’ve been here six months now, so I’m approaching my ‘probation period’ end. But I’ve got a good idea of how we can make this business work.
How is that?
You’ll see
