The Pit - IMI Trust

The newspapers and investment magazines around Australia seems to be hooked on trading CFD’s (Contracts For Difference) on the ASX (Australian Stock Exchange). Actually, there is very little editorial coverage of the CFD ‘phenomenon’. Most of the ink is on advertising the platforms on which to trade this relatively new instrument.

An analyst on CNBC claimed that approximately 50% of trades on the London Stock Exchange are CFD trades now dwarfing all the other instruments in the multi-billion dollar derivatives market. Australian investors are trading just a fraction of that number but the figures are anticipated to explode over the coming months.

Because of this, many players are scrambling for market position. How do you get ahead when there are so many people vying for market share?

We have recently been engaged by The Sharemarket College to assist marketing the SMC Trader online trading platform. One of the challenges we have is competing in a very competitive market.

A few months ago at the Melbourne Traders Expo there are booths 3×3 in size with companies all attempting to sign you up. As an investor how do you choose which CFD provider to go for?

The Sharemarket College is fortunate enough to have a brilliant product that offers investors state-of-the-art tools to facilitate their investment. In addition, they have over a decade worth of testimonials from their clients that have been through their investment education courses. But how else can you appeal to the average investor?

Do you look at the advertisements in Personal Investor, AFR Smart Investor and Intelligent Investor and think ‘That deal looks good, where do I sign up’? Do you read the ‘advertorials’ in Wealth Creator Magazine or Your Trading Edge and think they contain the right information to make an informed buying decision. Do you ask the man standing in the middle of the Sydney Investment Expo wearing an ‘I Hate CMC Markets’ T-shirt what his opinion on who’s the best CFD provider? I don’t think he will be trading CFD’s with CMC.

As an investor, the choice can be difficult. As a CFD provider trying to claim ‘that’ investor, the road is even more treacherous.

IG Markets, judging by their front-page advertisement on the Australian Financial Review, are offering a good deal. Low commissions on trading they advertise. Low commissions sound good but you’ll find that the discounted rates only apply if certain trading criteria are met. They are making a cut somewhere that’s for sure. They have to. That one advertisement would have cost around $15,000.

There are a dozen other entities all trying to earn your dollar and most show great examples of how NOT to go about your marketing. If you ever want to see poor marketing in action, you will commonly find these two elements.

1. Reduce trading commissions.
2. Throw amazing amounts of money at blanket marketing which offers no real benefits, but mentions your discount trading.

Sounds similar to the IG Markets marketing plan. Effective? Probably. But it may not be as efficient as it should be.

Other domestic players like Macquarie, Sonray Capital Markets and Tricom use a more corporate model. Day trading, online trading, full service brokerage and whitelabelling and referral plans. This is in own right is effective and profitable but they want a slice of the ‘mum-and-dad’ pie too.

The CFD trading revolution has fully hit Australia. Funnily enough, the centre of global trading, the US, doesn’t allow its citizens to trade CFD’s. The rest of the world can trade CFD’s on the New York Stock Exchange and Nasdaq with no problems.

And we will… The Online Trading industry in Australia is going to massively expand over the next few years. CFD’s are going to play a major role in that expansion and we look forward to enjoying the ride.

We’ll be working on promoting the SMC Trader until the end of 2007 so we’ll definitely give you updates on how it goes. If Commsec and ETrade, start issuing statements that they’re numbers are falling then assume we are doing well.
That should happen anyway as both are really limited in both functionality and product offerings. It’s true.

To view the SMC Trader go to http://www.smctrader.com  and to view the SMC Cafe, where traders meet, go to http://cafe.smctrader.net