Do online trading platforms in the Middle East respond to the needs of an increasingly demanding retail investor base?

Influence of retail investors across the region and the evidence suggests that this community will continue to strengthen its presence and wield considerable investment clout in the years to come.

In recent years, new online-only brokerages have set up shop in the region, driven by an educated and tech-savvy population.

Digital platforms are becoming more accessible to individuals who seek self-directed investment opportunities, providing sophisticated solutions at minimal or no cost. This has led to new options and technological solutions becoming available to new and existing investors.

This growing competition has put downward pressure on fees, which is attracting a new breed of investors who are hungry for information about investing in equities not only locally, but also overseas including the US markets.

Retail investors in the Middle East are attracted to the depth of the US markets simply because it’s the largest capital market in the world boasting the most liquidity, comprising some of the world’s biggest brands amongst its listed companies.

Looking at Nasdaq alone, with an increase in the Nasdaq Composite Index of 67 per cent in the last five years (Source: Nasdaq. As the end of December 2023) combined with the presence of highly liquid stocks in the technology sector and beyond, it’s no surprise that the US market is viewed as an appealing investment opportunity.

Nasdaq’s experience of working with financial institutions around the world shows that retail investors have a strong desire to improve their financial literacy and that brokers who satisfy this appetite for information gain an advantage over their competitors.

As financial literacy improves, especially among newer investors, their demands for more sophisticated information will also grow.

They will eventually seek access to the trading tools and data used by sophisticated professional investors.

Where an investor chooses to open an account will depend greatly on whether a broker can offer this level of service. Among professional equity investors, it is common to analyse the depth of order book – which is a record of buy and sell orders that are waiting to be placed – to make sure they are trading at the best prices and the most accurate information possible.

Nasdaq can make professional-level order book data available to retail investors via brokers and other financial information providers which show orders and quotes at every price level in the Nasdaq, New York Stock Exchange and regional-listed securities, even for odd-lot orders.

Initial public offerings (IPOs) for companies seeking to list in the US attract the attention of investors from around the world and the Middle East’s growing population of first-time traders are expected to be no different.

With the Nasdaq being home to some of the world’s most sought-after IPOs, we are in a unique position to provide investors with insight into how newly listed companies are likely to trade, typically during the quote-only auction period before the first trade.

Online brokerages in the Middle East are utilising technology to reduce costs, pouring resources into cybersecurity and offering their account holders more investment research and enhanced educational resources, which all point to rising demand for financial data and powerful analytical tools.

These factors set the stage for continued growth in trading and the number of brokerage accounts in the Middle East and as financial literacy improves across the region, we see huge potential for growth in the number of new investors as investor populations rise.

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The writer is the senior vice president and global head of Data, Investment Intelligence at Nasdaq.