The Trend of Mobile Trading Strengthens, Regulation Required

​Trading securities on mobile devices has been a trend for many years, strengthened further as people have spent more time online during the ongoing Covid-19 pandemic.

According to data from Statista, global internet usage grew at steady rates of between five and six percent on average per year until 2019 when 3.97 billion internet users were estimated. In 2020, the number went up by 15 percent – as of January 2021, there were 4.66 billion active internet users worldwide – 59.9 percent of the global population. Of this total, 92.6 percent (4.32 billion) accessed the internet via mobile devices.

While trading platform providers are under continuing pressure to keep up with demand and to differentiate themselves from peers, retail investors and traders need to make sure that they use their ability to place trades wherever they are wisely.

When smartphones and tablets first found their way onto the market in the 2000s, retail traders used these mobile devices mainly to check security prices in real time, on the go. The actual trading was usually done at a desktop, on a laptop or over the phone.

Over time, technological improvements led brokers to create applications for mobile devices that enabled their clients to buy and sell securities with the same speed, security and reliability offered by a desktop or a laptop.

A driving force behind this development has been the demand from a younger generation who are comfortable using the internet, social media and mobile devices. When it comes to finances, studies show that millennials often don't trust institutions and are keen to be in control of their own accounts.

This generation grew up grew up with appalling terrorist attacks, the worst financial crises since the Great Depression and, as a result, job market setbacks that often proved hard to recover from Cheap data plans, affordable mobile equipment and high performance 4G and now 5G networks may also have contributed to the shift – which is occurring in line with the e-commerce boom. Global mobile data traffic in general grew by 14% between Q4 2019 and Q1 2020. Experts predict this trend will continue for many years to come. According to the Statista report, 5G subscriptions grew by 70 million during the first quarter of the year and will have reached a total of 580 million by year-end 2021. The five-year forecast is that this number will have grown to 3.5 billion by the end of 2026.

Today, hardly any broker targeting retail investors does so without a mobile trading offering, and some mobile-only platforms have also come to market with apps that provide easy access and simple navigation while maintaining a comparable level of security to desktop trading applications.

With differences between mobile trading apps and conventional desktop apps continuously decreasing, retail investors should be aware of the subtleties of mobile trading.

Once traders are heavily engaged the advantages of mobile trading become obvious, particularly for day traders: a mobile app means the flexibility to be able to react to news or market developments at any time, at their convenience, within the opening hours of the market they trade.

For casual traders, mobile trading can hold certain disadvantages. The pocket format poses the risk that the time dedicated to trading gets out-of-hand. This, in turn, comes with some follow-up risks.

These risks include buying or selling more and faster than would be appropriate given the investor's risk profile– based on emotions or non-reliable sources of information – significantly increasing the risk of less optimal decisions.

Also, the format can be seductive and can encourage addictive behaviour. For many, the reduced size of the screen can be critical, since important information can more easily be overlooked than would be the case in front of the larger PC screen.

The fact that ESMA has directly addressed these concerns show they are not theoretical in nature, and the effects can be exacerbated given the attractive trading conditions widely available today. 

A specific focus of regulatory concern has been the opportunity for investors to exchange information on markets and securities via social networks. "Social trading", as this trend is called, includes the option of making an entire portfolio public. While this can be a chance to copy successful strategies of other traders the dangers of herd behaviour may well outweigh any benefits.

As a retail investor-focused business, we welcome the additional level of availability facilitated through mobile trading, but we believe the risks outlined above represent another strong argument in favour of non-institutional order flow taking place on trading venues.

Execution via a regulated platform eliminates much of the abusive potential through strict trading controls and rules and offers the investor full transparency over the real supply and demand at any given point in time. In combination with a modern trading frontend, as is commonly offered by Neo-Brokers, this will become a state-of-the industry trading experience for the retail investor.

​About the Author

Martina Hoffard, Head of Marketing, Spectrum Markets