UAE low-cost robo-advisory platform Sarwa introduced a zero-commission, zero-transfer fee stock trading service to tap into demand for online trading that has surged since the outbreak of the Covid-19 pandemic last year.
The Sarwa Trade app will give retail investors access to more than 4,000 publicly traded stocks and exchange-traded funds listed on US exchanges, the company's co-founder and chief executive Mark Chahwan said on Wednesday.
“The options for stock trading in the Mena region are few and far between – traditional brokerages have high fees, the technology is dated and the experience isn't exactly user-friendly,” Mr Chahwan said.
Retail investors are increasingly seeking access to markets with the help of technology, leading to a surge in popularity for zero-commission trading apps such as Robinhood, eToro and Interactive Brokers.
Demand for trading apps soared during the pandemic as monetary easing by the US Federal Reserve and other central banks around the world gave novice day traders more money to invest during pandemic lockdowns, according to a report by Finra Investor Education Foundation, based in the US, and the National Opinion Research Centre at the University of Chicago.
“Market dips that made stocks cheaper to buy and the ability to invest with small amounts were among the top reasons younger and inexperienced investors reported entering the stock market,” said the study, Investing 2020: New Accounts and the People Who Opened Them.
Trading platforms traditionally generate revenue in numerous ways, including charging trading commissions, keeping interest on cash deposits and receiving payment for order flow by routing orders to market makers, Mr Chahwan said.
However, Sarwa will not be charging a commission, dealing fees or administration fees on the Sarwa Trade platform when users buy or sell stocks. Local transfer fees from UAE bank accounts will also be waived.
“We saw an opportunity to take the simple, human approach we're known for and apply it to the trading experience,” Mr Chahwan said.
“We always have our clients and community at the centre of what we do and that’s why our product is localised for transfers. This way, UAE residents with a local account can avoid the high international transfer fees.
“We make money in different ways. We have some margin on our very competitive FX rates and because we have different products, we are able to also generate revenue streams from them, such as Sarwa Invest, as well as keep our costs super low using technology.”
In the future, the company may generate revenue similar to other online trading platforms, he said.
“These will be on specific future offerings and may include interest on cash deposits, margin financing and a subscription model to receive additional perks.”
Founded in 2017, Sarwa Invest uses artificial intelligence to rate an investor’s risk tolerance and assigns them a tailored investment portfolio of ETFs, charging them lower advisory fees than traditional financial advisers and wealth managers.
In August, Sarwa, which is regulated by the ADGM Financial Services Regulatory Authority, raised $15 million in a funding round led by Abu Dhabi's Mubadala Investment Company.
The series B round brings the trading platform’s total funding from regional and international investors to about $25m since it was founded, the company said at the time.
In July, Sarwa also launched Sarwa Crypto portfolios to tap investor demand for digital currencies despite price volatility.
Cryptocurrencies are not licensed by the UAE Central Bank, although a number of cryptocurrency exchanges have been given permission to operate within the ADGM. The UAE dirham is the only legal tender in the country that is recognised by the Central Bank.
“Our approach to investing hasn't changed: the most efficient way to grow your money long-term is to have a diversified, low-cost portfolio that tracks the market,” Mr Chahwan said.
“Contribute to your portfolio regularly and stay the course. But that doesn't mean there's no place for buying and selling individual stocks as part of a holistic financial plan.”
The Sarwa Trade app is available on iOS and Android operating systems.