July 20, 2021

We cannot walk into any MRT station without seeing an ad for moomoo. The all-encompassing marketing has made moomoo a huge initial success with 220,000 new sign-ups achieved in less than three months, since Futu Singapore (Futu SG) set up shop earlier in March. The last we heard, these numbers are still rapidly growing because of its intuitive features and host of educational tools and resources.

Google moomoo and the top search suggestion would be “Is moomoo safe?”

The moomoo app, a trading platform offered by moomoo Inc., is a subsidiary of Futu Holdings Limited (Futu). In Singapore, investment products available through the app are offered by Futu SG, a capital markets services license holder regulated by the Monetary Authority of Singapore.

How can one not be intrigued or slightly fascinated after following the GameStop/AMC/Bed and Bath saga play out and watching retail traders making fools of professionals?

We are fortunate to have a good friend who has been a full-time Reddit trader for the past two odd years before landing a job recently to give us the lowdown, and we pieced together the evolution of moomoo and the future of day trading.

The spawning of moomoo trading platform started with the decline in Singapore’s day trading scene, which transpired in 2013 and the Blumont scandal, a major turning point for the local stock market. Ever since, day trading or penny stock trading on the SGX fizzled out and stocks cannot even pull off a 5.5 per cent daily gain without a query from the authorities. It should be no surprise that Singapore IPOs saw a 53 per cent drop in 1H21.

Retail investors and day traders turned their eyes to the US and Hong Kong markets for all the depth, liquidity and name familiarity to satiate their need to punt and for some, to diversify their portfolios.

Traditional brokerages started to lose their iron grip on the market, without US licenses, only facilitating as middlemen and charging hefty fees of up to 0.3 per cent on notional amounts, even for transactions in the millions of dollars as well as custody fees which saw accounts migrate to discount brokers like Saxobank and Interactive Brokers for fees of just two cents per share, regardless of the notional.

Many still maintain their traditional brokerage accounts which are necessary for CPFIS and SRS transactions and CDP custody for long-term investments, and also for the illusion of safety of a locally entrenched broker, being mistrustful of the discount houses after the MF Global bankruptcy in 2011.

Besides the attraction of the fees, online brokers provided superior platforms over traditional brokerages that leave much to be desired when it comes to digital features. They would be described as archaic not just for the unfriendly interfaces, charting abilities (compared to online brokers) and weak branding, but also the limitations on order management on stop loss or staggered or good till cancel orders.

Yet, the best differentiator would be that the online brokers offer a full product suite with not just access to stock markets around the world, futures markets and derivatives such as options, foreign exchange, commodities and even Bitcoin derivatives these days with the added advantage of leverage trading or financing.

Tencent-backed Futu Holdings Limited’s subsidiary, Futu SG became the game-changer this year with competitive fees and comprehensive in-app features that provide you with all the resources you need to be a confident and savvy investor, even if the caveat is that it is not free forever.

The product suite comprises multi-market trading all within a single platform with three markets—the US, Hong Kong and Singapore, while growing at a steady pace with the introduction of some futures products and equity options.

So why is the world of retail trading raving about moomoo?

Fees and leverage aside, it is really about the user experience.

1. The user is able to launch on multiple devices at once; laptop, desktop, phone and tablet, something the other brokers are unable to provide.

2. Sharing in chat forums Reddit-style. Investors can post their stock trades and share on the forum for others to comment, ask questions, share insights and exchange ideas with rewards given for likes and follows. Your investment journey is never a lonely or overwhelming one again.

3. The charting abilities are several levels above any other platform with AI-driven intuitive charting as if almost reading your mind, automatically keeping track of your buy and sell trade on the chart as and when the feature is enabled.

For illustration purposes only

4. Far superior as well is their news aggregation ability which manages to scour relevant and related news across the web free of charge.

5. Ease of account opening with SingPass in the seconds and ease of settlement with a DBS direct debit/credit feature and T+2 settlement for other banks.

6. Similar to the online
brokers, the foreign exchange rates for account funding are at competitive interbank levels compared to the rates charged by banks for their multicurrency accounts subject to daily limits at the moment.

7. For the more sophisticated trader, there is an API for live feeds into algo trading models.

8. Cash coupons, stock cards and commission coupons are given for trades and unlocking features and such. These vouchers can be used to redeem cash, exchange for stocks and to offset commissions.

The impression is that moomoo is probably the best application for all levels of investors and the appeal is especially fast growing with the Millennial and Gen Z crowd. The company is committed to continually improve by involving users in the beta testing for the stock futures product range last month or so.

Professional investors like our friend would use the platform for cash trades although there is a slight complaint on the financing costs when compared to what some private banks offer. Nonetheless, it has opened doors to the average person to easily access the futures markets and margin trading which were largely inaccessible in the past.

Traditional investors may fret about the risks of custody of their stock holdings because whilst Futu SG is licensed by the MAS, it is not on the SGX panel of retail brokers and thus, not linked to the CDP. We understand that the platforms would have to use a local intermediary custodian which is not a major risk. As for US and Hong Kong stocks, all platforms will sub-custodise with local counterparties. Futu Holdings, listed on Nasdaq as FUTU, has a respectable market capitalisation of US$20 billion dwarves some of our locally listed brokerages.

The conclusion is that moomoo powered by Futu is here to stay and will evolve to serve users better. It opens doors for beginners and even seasoned day traders like our friend, educating and nurturing a larger market as it stokes retail interest.

Interested to start trading on moomoo today?

You can also put your investing knowledge to the test by answering these quizzes to earn some cash coupons that go straight to your moomoo trading account.

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