Online trading grows in MENA

In the past 10 years, conventional financial institutions in the MENA region have moved heavily to create an online presence for themselves. The online trading ‘tornado' started to affect the MENA region early 2004.

Since that time it has amazingly remodelled the financial industry. International and regional online brokerages, which first came into the scene, attacked the MENA mass markets with the new ‘unbelievable' phenomenon of online trading.

AM Financials noticed the increase in popularity of online financial trading worldwide. The company realised the need to heavily invest in its products and employees to service the increasing demand of online trading in the region. The company believes itself to be a financial institution that is uniquely different with its unparalleled online trading tools and diversified services.

There is no doubt that online trading differs tremendously from traditional trading practices. Giving investors the ability to trade the majority of financial instruments (stocks, bonds, futures, options, ETFs, currencies and mutual funds) online from the comfort of their own home, gave more weight to the financial markets being quite within reach. New huge trading volumes were created by online traders from the MENA region. Traders became able to log on from anywhere, appreciate market events and news and carry trading decisions at any time. With financial institutions and brokerage firms offering traders newer, easier and cheaper ways of investing/trading accounts holding, the online trading industry thrived in the region like never before.

“Like any other form of investment, online trading… has its own advantages and disadvantages,” says Mohammed Al-Hamidi, Managing Director of AM Financials. “Traders need to bear in mind each advantage and disadvantage, and its potential meaning for them, when trying to decide if online trading is actually a viable option for a profitable investment.”

It is true that online trading provides more benefits when compared to the risks involved, but anyone from a university student to an experienced trader should be aware of the world of online trading, not just the widely advertised advantages. Advantages of online trading are known and in the past years became very popular due to financial institutions' heavy advertisement. Advantages are mainly about the fully computerised trading process, access to advanced trading tools, direct control over trading account, ability to invest in multiple markets and instruments, fast trades, discounted commission rates, low capital requirements, high leverage for trading on margin, and the ease in account opening. In other words, it is all about technology.

It's not only retail investors who have benefited from developing technology. In the past few years a higher more advanced level of online trading used by large financial institutions and known as high frequency trading has jumped into the spotlight and became the talk of Wall Street. High frequency trading is when financial firms use superior computers and fast connections to make large trades in a matter of micro seconds catching fleeting moves in all types of markets. Evidently, all the mentioned advantages play a major role in driving amazingly huge trading volumes to the financial markets.

There are also risks involved in online trading. A major risk is margin trading, which becomes greater if trades are done extensively on it. Other disadvantages include mechanical/platform failures and the need of a good and fast connection. In online trading unlike traditional trading, investors are fully responsible for their trading decisions and most of the time there will be no one to help them in this process. Trading fees/commissions involved in online trading vary considerably with markets, financial institutions and type of trading account or software.

A good case study of the risks and disadvantages of technology and online trading is 6 May 2010. On that day US stock markets opened and trended down most of the day on worries about the debt crisis in Greece. At 2:42pm, the Dow Jones began to fall rapidly, dropping over 600 points in five minutes for an almost 1,000 point loss on the day by 2:47pm. Twenty minutes later, by 3:07pm, the market regained most of the 600 point drop. After almost five months of investigations the SEC and CFTC issued a joint report that detailed how a financial firm was selling an unusually large number of contracts by mistake; it exhausted buyers, and then high-frequency traders started aggressively selling, accelerating the effect of selling and contributing to that day's crash. Does this mean that innovation in the financial markets must be limited? We all know that had technologies been restricted, the financial industry would have been poorer, investors would have had fewer choices, and the future of the financial world would have been dramatically different. On the other hand, investors, trading floors, and regulators need to understand that technology is not infallible.

The huge demand of online trading in the MENA region forced few regulatory bodies to impose strict rules in an attempt to control this ‘new' business. Lebanon was one of the few countries in the region that took serious steps in an attempt to regulate online trading. With all of that being said, online trading business in this region is still lacking clear defined characteristics by regulators.

This adds an extra load on financial institutions like AM Financials to enforce strict self-regulatory rules when it comes to online trading. The aim of such rules is to protect the clients' and company's funds against all eventualities, thus safety of funds always comes first. AM Financials is one of the leading financial institutions in the Middle East and North Africa. The company offers online trading services in addition to other personalised services in portfolio management, trade execution, investment advisory, banking services and custody as well as facilities. AM Financials is a sister company to Al-Mawarid Bank, and is a regulated Financial Institution by the Lebanese Central Bank.

Investors in the MENA region value the human contact. No matter how high tech and easy to use your products are, it is always easier for the investor to contact a person when he has a query. Since customer service is a major factor in business growth and success, AM Financials chose Lebanon to service the world.

Over the years, AM Financials has embraced multilingual people of different backgrounds, giving them the opportunity to unleash unprecedented creative energy. This empowers a rich variety of ideas and experiences in delivering the most pioneering and ground-breaking solutions to clients worldwide. And so, AM Financials is dedicated to maintain a diverse culture that attracts, develops and retains the best talents and encourages them to reach their full potential. The team at AM Financials quickly adapts to its clients' preferences and cultural differences. Advanced training sessions are conducted by the company to keep its employees up to date with the changing financial scene. Employees are equipped with a variety of ideas to provide revolutionary and innovative solutions to meet various client requirements.

AM Financials always urges investors to educate themselves about the financial markets in order to achieve the desired objectives behind their investments. As long as amateur investors control the market, the industry in one way or another is headed for continuing turbulence. Many investors consider online trading to be a simple way towards wealth; yet, they face many difficulties, knock downs and impediments that prevent them from attaining their targets. On the other hand, traders who are willing to invest time and effort to pass the pitfall by getting control of their fear, by finding harmony with trading, and by working hard to strengthen their confidence, may be cut out to be professional online traders.

“AM Financials believes that financial education at universities is crucial, but it should clearly not relieve financial institutions from their role of providing their clients with effective education before investing,” says Mr Al-Hamidi. “The financial sector is responsible for ensuring, through financial education, that employees of the sector have the right qualifications to present in a simple manner the financial products/services they offer and always act in the interest of the client.”

About AM Financials
AM Financials s.a.l. is a Lebanese Financial Institution regulated and licensed by the Lebanese Central Bank known as Banque du Liban (BDL). AM Financials is an authorised broker at the Beirut Stock Exchange and belongs to the Association of Stock Exchange Brokers. AM Financials is a member of the Association of Financial Institutions in Lebanon. AM Financials is audited by Grant Thornton.

For more information Tel: +961 136 9169; Email: info@amfinancials.com; www.amfinancials.com

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