Invast Securities and the Japanese FX market – Interview with President Takeshi Kawaji

The other day, we had a chance to interview Mr. Takeshi Kawaji, President of Invast Securities Co., Ltd which recently

The other day, we had a chance to interview Mr. Takeshi Kawaji, President of Invast Securities Co., Ltd which recently announced a bid to take over the the Click 365 businesses , (listed FX business), of Mita Securities Co., Ltd. and Star Kawase Securities Co., Ltd. Also, in July, Invast Securities became the number one broker in Japan in terms of the number of Mirror Trader accounts held.

We conducted an exclusive interview with Mr. Kawaji of Invast Securites to discuss their expected further global expansion.

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Q. Would you tell us about Invast Securities?

Invast Securities is an online financial service company offering mainly FX, and is listed on the JASDAQ stock market with a valuation of 5.9 billion JPY ($74.7 million) paid in capital and net assets of around 10 billion JPY ($126 million). Invast Securities is one of the largest FX brokers in Japan and has total client deposits of around 55 billion JPY ($696 mllion). The total deposit after the business succession from Mita Securities and Star Kawase Securities is expected to be approximately 80 billion JPY ($1.01 billion).

There are two philosophies that drive Invast Securities. One is to deliver “surprise and inspiration” through our services with “integrity”. The other is to provide true satisfaction to all the people we work with. We are operating our business providing financial product services based on our guiding principle, which is integrity, and also keep in mind we aim to give better services, consistently exceeding our customer’s expectations and to make them feel comfortable and impressed with our company.

We proudly display the word “Integrity” on all employee’s business cards, so that we can show that we truly make the word a part of our core philosophy. As a result, we are receiving more support from our clients and are able to grow in good order and hope to contribute to all the people having a relationship with us, including customers, vendors, our employees, and their families as well.

We would like to give an example from our daily operations on “exceeding customer expectation with our integrity”. We received a comment from a customer that he planned to withdraw from trading with “ST24” as he had incurred a loss. Typically, most companies would not disclose this type of negative comment to their customers for fear of tarnishing their image. We fully disclosed the comment to our customers as well as our advice against making unreasonable trades so that both this trader and our other customers could use his experience and our advice. Our client was really surprised and impressed.

Q. Please tell us about your background.

I was born in 1974 and am 37 years old. From the time I was15 years old, I studied abroad in US and graduated from high school and university in Boston. After that, I worked for a securities company in the UK, and have been working for Invast Securities since 1999. As for my career, starting as a salesman of traditional equities and fixed incomes, after being in charge of our equity underwriting business such as IPO (Initial Public Offering) for new listing of companies, I was put into the role of Head of Business Planning to work towards listing our company on the Heracles (currently JASDAQ) market. Afterwards, I became a Managing Director and then Executive Vice President. I have been in my current role since January 2010.

Q. Please tell us why Invast Securities decided to take over the FX business of Mita Securities and Star Kawase Securities in the middle of tax unification between exchange-traded and OTC FX.

Invast Securites has been involved with the exchange-traded FX market since its inception. Currently, Invast Securities is the largest provider of Click 365 offerings in terms of customer margin deposits.

With the power of our brand as the largest Click 365 broker, we have been receiving the support of our clients who hope to trade in a longstanding and stable relationship with their provider. Consequently, the business of Click 365 has been growing as a profitable core business of Invast Securities.

However, the profitability of Click 365 service providers has been decreasing due to the new leverage restrictions, tax unification, and fierce price competition. So, in order to continue the business in healthy condition, certain change in scale of business has been essential.

In this business environment, we have set our true goal to expand our overall customer base providing higher level of service in a highly transparent way by utilizing Click 365 with a certain size of business.

Q. Please tell us products/services you are now focusing on.

ST24 (Mirror Trader platform by Tradency recently launched in Japan) is an auto-trading margin FX offering which we started providing beginning in November 2011, and is the one we are now concentrating on. ST24 allows you to choose an auto-trading program (strategy) from anywhere around the world and have it trade in your account. Since the inception of this service, we have added 25,000 accounts in just 9 months, and we quickly became the number one Japanese broker providing Mirror Trader.

To put it simply, ST24’s attractive concept is “To be managers rather than players.”
So far using traditional trading strategies, we have traded at our own discretion. It was just like a baseball player in the batter’s box, trying to get a hit or slam a home run hitting the ball being thrown by the pitcher. However, with ST24, the trader will play just like a manager of baseball team. Instead of standing in the batter’s box himself, he selects the batter to play by checking out the historical track records, examining the data of the players and selecting the starting members. If the performance is good, you can let them keep playing. If you think the fourth batter doesn’t hit well, then you can replace him. In ST24, you can operate like you are the manager of the team.

ST24 is equipped with 500-600 kinds of strategies and their respective track records of performance. We do not release any results regarding back-tested performance or any speculative value as we think any subjective information would interfere with customers’ decision to select the appropriate strategy. We never know how the player will play the game on that day.

We would like investors to take three basic actions; i.e.
1. To choose excellent strategies by reviewing their track records.
2. To check out the performance of the chosen strategies and whether or not they trade well.
3. To change the strategy if the actual performance is worse when compared to its historical record.

Since we launched ST24 in November 28, 2011, the number of users has been growing rapidly and it is the most successful of our newly launched business models. It has also generated really good responses from the clients. We can see that a lot of investors who are interested in FX but never traded before have been able to start currency trading with ST24. Customers who have been investing in investment trusts and/or foreign bonds also prefer ST24 because it allows them to trade as a manager by choosing the strategies rather than traditional FX trading which requires making a decision on every trade.

When we surveyed our clients in regards to why ST24 had been gaining popularity, they answered that ST24 was similar to Investment Trusts. Once they selected the strategies properly, they would not need to stay in front of PC and could leave the trading to the given strategies.

We consider ST24 a product with moderate risk and moderate return. The nature of moderate risk and moderate return seems to explain why the people who have no experience in FX trading and who just trade only with an investment trust are starting to trade with ST24. We are promoting ST24 by recommending a trader have at least three strategies and more than the minimum deposit of 500,000 JPY.

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We never say that you can start trading easily with the initial deposit of only tens of thousands of Yen.

Though it has not been long since we started offering the ST24 service, we are pleased to hear that the performance for the investors is improving compared with discretionary trading.

FX is a rather small product in the whole world of financial products, and system trading would account for only 1-2% of the FX space. People have an image that system trading is for the intermediate or advanced investors. We are making the effort to make the ST24 a service for mid and long term investment, not just for one certain niche market.

Q. Invast Securities became the number one among the brokers providing Mirror trader. How did you achieve more than 25,000 accounts in nine months since its inception?

We strongly believe that ST24 (Mirror Trader) will be a very useful investment tool for all investors including people who don’t have any experience in system trading or FX trading. We believe that explaining ST24 thoroughly to our customers led to this success.

Actually, we are confident that our website content is much more useful than those of other Mirror Trader brokers. We are holding web seminars as well as educational videos for beginners.

Although system trading so far might be used by intermediate or advanced traders, we provide our ST24 for novice and advanced traders as the product fits all traders.

Q. What do you think about the latest trends in the Japanese FX market and the activity of competitors?

The FX market in Japan is reaching a turning point. It did not end just as a temporary trend with just the JPY depreciation. Japanese FX Trading has succeeded in gaining a foothold as a general financial product. As for evidence of this, most of the major securities firms are now handling FX, and the banks are entering into the market through their subsidiaries.

Japan is a large exporting and importing country. We are confident that FX trading is familiar to Japanese people as a product in financial transactions, and will grow further.

On the other hand, we think FX trading on a mid to long term basis with low risk would be more popular for ordinary clients rather than taking huge risks with higher leverage. We also think it is difficult to repeat the hundreds or thousands of trades from morning until evening sticking to the PC like semi-professional traders. We consider that the mid and long term type of FX trading would come out as an alternative investment solution for foreign currency deposits and foreign currency denominated investment trust.

In such circumstances, FX brokers are now categorized into three groups.
The first group has larger FX brokers providing attractive narrow spreads and getting supported by traders who trade a lot.

In the second group, FX brokers would be either be beaten in price by the competition or abandoned by investors and losing money due to unsatisfactory services. This group is facing extreme difficulties.

Finally in the third group, the FX brokers succeeded in attracting clients with new value-added services which set them apart from price competition. This group gains consumer confidence by offering either trading tools or unique services. They keep growing by retaining stable business without entering a price competition or by offering narrow spreads.

I consider that the first and the third group can win and survive to the end but the second one is facing a difficult situation and may not survive.

Q. Invast Securities has a Chinese website for Chinese people living in Japan, what about the support system of the services? How do they react?

We conduct customer services for Chinese clients by four staff members including Chinese. The client base of Chinese residents in Japan is expanding very well. All of the client numbers, the trading volume and the deposits are growing and we would like to put a high priority on this service.

Most of our Chinese customers have trading experience. They make deposits with Japanese brokers, not their local brokers, because they worry about the safety of their funds and the size of the broker they use. We even had a customer who came to our office to confirm the existence of our company with his own eyes.

Q. We recently noticed that some Japanese brokers started expanding overseas. Does Invast Securities have plans for global development? If yes, which country and how?

Currently, we are preparing to receive a license in Australia. We are also constructing an English website necessary for recruiting local staff and getting better recognition of our company in the local market.

Q. Please tell us your corporate vision for next three years?

We envision being a company where a lot of skilled individuals get together from around the world, driven by our management team which is composed of the top talented professionals in the industry and is continuing to evolve itself and to generate new value-added services.

To be such company, we will proceed with the globalization of Invast Securities mainly in Asia and the Pacific region thoroughly improving the quality of our services and making sure we are able to differentiate ST24 to be an alternative financial product to investment trusts. We will continue to strive to keep on attracting “excellent talents” from all over the world, which is the core element of our business.

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