Direct Interface
Online trading provides a secure and convenient platform for investors to trade directly on the stock market. Mayank Singh reports


Abdul Hamid Ahmed an avid investor has stopped making frequent trips to his brokerage company to handover cheques, purchase shares or to discuss price movements. Here’s why: Ahmed has shifted from trading through a broker to trading online. “This gives me the flexibility to trade without going through a broker,” he says.

Multiple choices
With a number of brokerage companies and institutions vying to introduce online trading services investors now have a variety of choices. There are three online trading platforms on offer in the market - Al-Amin Securities, United Securities and Oman Arab Bank (OAB). Al-Amin offers two services – Al-Amin Trade and Mubasher Pro. The first one is a basic trading platform that allows investors to trade, while Mubasher Pro is a more advanced version. United Securities e-Tadawul and OAB’s e-link are the other two services on offer. Says Lo’ai Badie Bataineh DGM – investment and development and head of Investment Management Group, OAB, “To trade online an investor just needs to have an online trading account, sufficient cash to trade and a know how to use a computer.”

The first step in the process is to open an Internet trading account with any of these companies. On doing so he gets an investor number (folio number) which enables him to trade on the Muscat Securities Market (MSM). In addition he gets a user ID and a password which enable him to access his account. An account holder can see his portfolio, watch the market price of various shares and place online orders. “The investor needs to come to us for the first time to get an MSM depository number which is essential to activate an account. In all it takes about 15 minutes for an account to become operational,” says Hussain Ali Al Raisi, Executive President, Al-Amin Securities.

While e-Tadawul and e-link give investors the facility to trade on the MSM, Al-Amin’s Mubasher Pro extends this facility to trade across the region’s bourses like Saudi Arabia, Abu Dhabi, Bahrain, Kuwait and Dubai. A subscriber can trade on these markets using different passwords for each market. Mubasher Pro also gives clients a detailed analysis of the market in the form of financial data, graphs and charts. All this, however, comes at a price – Mubasher Pro comes at an annual subscription of RO200 or a monthly rental of RO20. The software can be installed on a mobile phone as Mubasher Mobile enabling a subscriber to get market related information on his mobile or a Blackberry. So anyone travelling and not having access to a personal computer can see the information on his mobile phone. “The service is getting popular and we have 90 to 100 Mubasher Pro users,” says Raisi.

Technology at work
With security being a major concern all the organisations have invested in securing the system. Says Bataineh, “OAB has spent over over $1mn to ensure the security of e-link.” Both Mubasher and e-Tadawul use a 128-bit encrypted SSL (secured socket layer) security system. “SSL creates a tunnel between the user and us and if anyone tries to hack into the system this tunnel is closed automatically,” says Osama Bassam, IT consultant, United Securities. SSL is one of the most popular security module used internationally.

To enhance confidentiality, United Securities posts an account holder’s password and login to one’s e-mail ID instead of handing it over manually. Al-Amin has introduced a transaction password in addition to the mandatory login and trading password. The user needs to use the transaction ID for making an online transaction ensuring additional security.

Overall, there are two important components that the system needs to connect – the first being price and the second is trade. The price of a share is generated on the MSM and so every organisation needs to connect its trading platform to the MSM server. This is done through leased lines. The price generated on the stock market is transmitted through these leased lines and is displayed on the customer’s console in real time.

To facilitate trading, the MSM has a special engine and dedicated server for each company. Orders are booked online and are sent directly to the MSM for execution. These then get executed instantaneously. Investors can trade online during market hours from 9.30 am to 1 am. OAB and United Securities take orders during trading hours, Al Amin accepts orders even after the market closes, though these are executed only on the next trading day.

OAB has installed a special computer screen in its office for customers to come and check share prices.

The system can be accessed using either a dial-up facility or through a broadband connection. There are times when the dial-up speed of 30 kilo bits per second may prove to be a trifle slow for live updates. ADSL speeds of 256 kilo bits per second would be the ideal vehicle for the service. However, the pricing of an ADSL connection (the lowest package being RO12 per month) has been a deterrent to increasing its usage. Says Osama, “If we get some more services from MSM (like being connected to other markets) and lower priced lines from Omantel then online trading can grow rapidly in Oman.”

Companies on their part are trying to make the best of the bargain. United Securities for example has leased out space at the Knowledge Oasis Muscat (KOM) to host two of its three servers (one is kept in its office) to enhance the speed of its download. This provides e-Tadawul a higher bandwidth as KOM has a 2MB upload capacity compared to one MB in other places. Thus a download facility from a server hosted at KOM takes one-sixteenth of the time compared to a server hosted elsewhere.

Despite glitches such as slow dial-up speeds, online trading is slowly but surely gaining prominence in the Sultanate. Al-Amin, for instance, has 4,000 subscribers out of which almost half are active users. United Securities has notched up 215 clients.

International experience shows that online trading on an average increases trade transactions on a stock market by at least 30 per cent. This is not surprising as the service offers a number of advantages. “Online trading encourages retail investors to participate on the stock market as small investors find it difficult to get enough attention from brokers,” says Bataineh.

The brokerage fee for online trading is also comparatively lower. Thus brokerage companies which charge a 0.75 per cent fee on the value of a transaction are charging 0.4 per cent for a similar transaction carried out online. Online trading also strikes a chord with youngsters who are more technology savvy.

Cutting edge
Most companies have adopted state-of-the art facilities for the service. For example – United Securities is using FIT (first information technology), a regional leader in online trading technology. FITS uses four servers namely E-access which allows the integration of the web based user with the brokers database, Fits Trade which facilitates the connection between United Securities and the MSM, FTP pro which sends out messages to the client and interconnects the web data base with the company’s database. And finally, there is a database server. FIT scores over its rival as it combines an order management system with online trading.

Though the technologies used by different companies may vary almost all of them use an FIX protocol network and a TCPIP system to communicate. The protocol is recommended by the MSM. Interestingly, while United Securities and OAB use a Windows based platform, Al-Amin uses both a Linux and Windows based system.
Given its benefits, online trading is sure to lure more customers like Ahmed away from brokers and onto their computer screens.

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