Capital Expansion Ventures into Stock Trading Sector
Neobroker Scalable Capital Shakes Up the Market with European Investor Exchange (EIX)
After keeping the industry guessing, Scalable Capital finally made an official announcement. They're jumping into the stock exchange game by establishing the European Investor Exchange (EIX), ready to face the upcoming loss of rebates from Payment for Order Flow (PFOF). This move follows rumors about neobrokers setting up their own market makers, with Scalable officially joining forces with the Hannover Stock Exchange, part of the BOAG Börsen group.
New Partnerships and Opportunities
Scalable's choice of Hannover might seem unusual, but their founders, Florian Prucker and Erik Podzuweit—professionals with deep securities trading experience—make the partnership promising. And if their existing "fully verticalized" tech platform, handling custody, trading, clearing, settlement, and custody in-house, is any indication, they mean business.
The partnership with Baader Bank, though, will not fade entirely. It will no longer serve as the primary transaction route for Scalable, but existing connections will remain. Aside from financial reasons, diversifying business is valued by regulatory authorities like BaFin, ensuring risk diversification and operational stability. Scalable also has ambitions in the deposit business, with applications for a license with BaFin in the works. Deposits will be distributed to partners like Deutsche Bank and BlackRock (money market funds), allowing customers to pick their preferred interest rates and helping Scalable gradually grow its own deposit business.
Challenges and Competition
Scalable doesn't seem to be chasing a full banking license just yet, preferring to partner with an as-a-Service provider boasting a bank balance sheet for traditional banking business. Trade Republic, opting for a full banking license, faces challenges, including delayed dividend bookings for some customers, which caused frustration. The race for future trading models is on between the two—while Scalable has exclusive partnerships with entities like Gettex, Trade Republic works with L&S Exchange.
Building the Future of Trading
The Hannover Stock Exchange is, according to reports, excited about the partnership, eager to capitalize on niches. With Scalable's expansion across Europe and the EIX as its foundation for trading, trading will have to carve out its space under the planned new EU regime of the Consolidated Tape, where price quality requirements may increase. Attracting liquidity will help provide better bid-ask spreads.
Navigating the Cost of Trades
Neobrokers must soon rethink their pricing per trade, as the income from rebates may soon dry up. This shift will require care and finesse, as marketing as a "free broker" could be at stake. Charging significantly more than their current 1 euro per trade may not be feasible.
While specific details about Scalable's partnership with the Hannover Stock Exchange are still scarce, the neobroker's move into the stock exchange business promises an intriguing future for trading and investment opportunities across Europe.
Additional Insights:- Scalable Capital's EIX aims to provide retail investors across Europe with access to trading opportunities.- Through EIX, Scalable offers a wide range of financial products, including stocks, ETFs, and recently, derivatives like certificates and warrants in partnership with firms like HSBC and HypoVereinsbank.- Scalable has been growing significantly, raising considerable funds and expanding partnerships. However, details about a possible partnership with the Hannover Stock Exchange are not yet known.
- Scalable Capital's founders, Florian Prucker and Erik Podzuweit, have a deep securities trading background, making the partnership with the Hannover Stock Exchange promising.
- With the European Investor Exchange (EIX) as its foundation, Scalable Capital's expansion across Europe promises an intriguing future for trading and investment opportunities.
- Neobrokers, including Scalable Capital, will have to navigate the cost of trades carefully as the income from rebates may soon dry up, potentially putting the "free broker" marketing at stake.
- Scalable Capital's EIX offers a wide range of financial products, including stocks, ETFs, and recently, derivatives like certificates and warrants in partnership with firms like HSBC and HypoVereinsbank.
