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July 21, 2009 


 Q&A: optionsXpress CEO Tom Stern, Executive Vice President Rumi Kuli 7/20/2009
The mission of Going Global, which appears on MidwestBusiness.com on most Tuesdays, is to educate and inform Midwest technology companies on what local technology companies are doing internationally so other firms can learn from the successes of like-minded peers.


CHICAGO – International expert Michael Muth recently interviewed optionsXpress CEO Tom Stern as well as optionsXpress executive vice president Rumi Kuli. In this interview, they discuss entering different markets, regulatory hurdles, servicing customers internationally and more. Listen to the full interview here.




Michael Muth: When did you enter each market? How? Why?
Tom Stern: At the end of 2003, we were getting more and more inquiries from international locations. They found us through banners and other types of search on the Internet. In 2004, we created a Canadian registered company that would cater to and service Canadian residents.

That led us to get some publicity in Australia. We then created optionsXpress Australia in 2004 to 2005. It was determined we should go to Singapore as well because we had a lot of interest from there. We eventually entered the European Union with clients in the United Kingdom, the Netherlands and France. We then created optionsXpress Europe, which is registered in European Union.


MM commentary: They’re essentially reacting to demand.


MM: What does it mean to be a registered company in each market?
Rumi Kuli: With brokerage firms, jurisdictions require you to register with the local financial securities authorities in order to be able to accept accounts. In Singapore, it’s the MAS. In Canada, it’s the IIROC. In Amsterdam, it’s the AFM. It varies by jurisdiction.

MM: What do you do to encourage trust in online global investing?
RK: We have toll-free numbers so they can talk with someone any time. During market hours, they can execute a trade with them for no extra charge. We pride ourselves on our customer service. You can click on a button and chat with someone live. In foreign offices, you can speak with people in those offices.

They can also visit those offices. We send them e-mails regarding online security and have an online security page. We’ve set up some other security on withdrawals similar to a PIN for online bank cards. We automated messages for customers. This results in phone calls to verify certain information. Customers can find plenty of information online.

TS: We built it on three “E”s. Education means we provide as much online information to become more informed and make better decisions.

Evaluation means we give them tools to make decisions. Finally, execution means we offer a low cost and provide the public the same edge the professional traders have on the floor. The safe-haven concept is important to us because we offer a national best-bid, best-offer service.

We don’t do any proprietary trading of any kind. You are therefore getting your order executed and nothing more. Because we don’t do any counterparty trading, there isn’t any counterparty risk. We also offer the security of SSL within our site so customer information is protected. Even a representative of optionsXpress or employee can’t see a password in a customer account.

At the next level and for another level of security, they have an RSA key that changes every 30 seconds.


MM commentary: This is a big and tough issue, but they seem to be addressing it well.


MM: What regulatory hurdles have you had to overcome in each country?
TS: Hurdles come from the requirements in each jurisdiction which always differ. For example. some require four eyes, which means four people on the ground. Australia, Singapore and Europe require those. Canada does not. There are different product restrictions in different countries.

The margin requirement for an options spread is different in Canada from the United States (i.e. collateral). The products offered in Canada are different. The mutual funds individually have to be registered with the security authorities. Most U.S. funds are not. You can’t offer some bonds and CDs in Europe. It can vary from country to country.


MM commentary: These can be a real pain sometimes.


MM: How do you educate outside of the U.S.?
RK: We offer education in all markets as a core offering. We have an aggressive schedule of live interactive localized and archived webinars.

We have a new education hub. It’s a course based study that’s broken up by product. There’s a graded quiz at the end of each module. We also do live presentations. Internationally, we generally will partner with an educator or trade show and less frequently we will sponsor our own seminars.

TS: The underlying philosophy is what we’re teaching is risk management and derivatives as mainstream financial instruments as opposed to gambling (as some think of it).


MM commentary: This is an important component because options aren’t understood as well throughout the rest of the world as they are in the U.S. The Germans were complaining vociferously about options and derivatives four years ago.


MM: How do you service customers internationally?
RK: We leverage what we have in the U.S. and supplement with our foreign offices. Those representatives answer the phones and answer questions. We have the benefit of those offices being able to back up each another. Depending on the issue, most are going to the local jurisdiction to be resolved. Some will flow back to the U.S. as well.


MM commentary: Because they’re still an English-centric company, this can still work well.


MM: Why don’t you offer personal coaching and electronic (ACH) deposits in other markets?
RK: Some jurisdictions won’t allow us to do some of those personal coaching campaigns. Perhaps you need to be licensed there for coaching or it might not be allowed in the jurisdiction. A Series 7 license or an equivalent might be required.

ACH is U.S. specific. In the European Union, you have direct credits, direct debits and BACS. We use BACS in Europe, which is their equivalent of ACH. It clears in the same kind of time frame.

TS: You have to look at the nuances in each jurisdiction because each jurisdiction is different. In the U.S., we have the check 21 system that clears in 36 hours. It takes five days to clear in Australia.


MM commentary: I would find it hard to believe that many customers would settle for five-day clearances anywhere these days.


MM: How does your offering change abroad with retail versus institutional?
RK: The institutional focus is fairly new. We’ve formalized that by recruiting more institutional business and servicing that side of the business. We’re doing that across the world and in the U.S. domestically. Retail is the greater share.


MM commentary: I’ve got to believe there’s great potential on the institutional side.


MM: What changes on your international Web sites in addition to prices and the domain name?
RK: The biggest differences are the URLs, the disclosure language and the legal language referring to the various regulators for those firms. We’ve tried to keep that level of consistency across firms. We know we will get better penetration with more localization. We’re figuring out what we want to change and make different.


MM commentary: This will probably change in the future.


MM: How much does your price advantage transfer to foreign markets?
TS: Our frequent trader rate is the same.

RK: We do add a lot of value-added benefits around the platform. We’re not trying to be the low-cost provider. Based on the tools and service we provide, all those things result in additional cost to us. While you can find lower rates, you can’t call in or get questions answered in a reasonable time frame. We are extremely competitive abroad.


MM commentary: Price isn’t necessarily as important as some of the other services they provide.


MM: How will you localize a Web site into foreign languages?
RK: It’s a lot about demand. There is a large cost to translating and being able to maintain the translations. As we average 10 software releases per year, each would have to be vetted for accurate translations. Some of the initial steps in the interim before we do all-out translation include foreign language search engine optimization and foreign language landing pages with other pages in English.

Those allow us to get some tracking and to find out information that indicates which languages we need to expand into. While te can track some language preferences within browsers, we can’t see it that readily because our Web site is in English. We don’t ask for a language preference. It’s difficult to figure out the timing to assess demand and figure out how and when to invest in localization.


MM commentary: The risks and returns to the costs and benefits here are huge.


MM: Anything else?
TS: There are so many thousands of pages and then changes with each release. We are looking at the site. Perhaps when you mouse over, you’ll get something in a foreign language to give some idea of what that part of the site is about.


Check out Michael Muth’s blog here.


Michael Muth is managing director of GATA, an international business development consultancy that helps technology companies build international partnerships. He can be reached at muth@midwestbusiness.com.
Click here for Muth’s full biography.

Previous Columns in 2007:
Q&A: Bosch Rexroth Director of Marketing Services Kevin Gingerich (6/22/2009)
Q&A: Vice President Tom Levesque at NanoInk’s NanoFabrication Division (6/8/2009)
Misperceptions About Expanding, Exporting Technology Products Worldwide (5/26/2009)
Q&A: ‘Get Ahead By Going Abroad’ Author C. Perry Yeatman on Working Abroad (5/12/2009)
Q&A: Changes From Siemens, Toshiba Amid Today’s Economic Recession (4/27/2009)
Q&A: Lih Tah Wong of Computer Mail Services on E-Mail Filtering, Blacklisting (4/13/2009)
Q&A: World Trade Center Illinois Chairman Neil F. Hartigan, Director Bilal Ozer (3/3/2009)
Recession: International Causes, Effects of Today’s Global Financial Crisis (1/19/2009)
Q&A: Ex-Chicago Tribune, ‘Caught in the Middle’ Writer Richard Longworth (1/5/2009)
Q&A: Midwest Regional Director Michael E. Howard of Export-Import Bank (6/17/2008)
Q&A: Intetics Managing Partner Alex Golod on Belarusian Economy (4/15/2008)
Q&A: Intetics Managing Partner Alex Golod on Protecting Intellectual Property (4/9/2008)
Q&A: Intetics Partner Alex Golod on Being a Jack of All Trades (3/31/2008)
Q&A: Motorola WiMAX Director Tom Mitoraj on Unstoppable Freight Train (11/26/2007)
Q&A: Motorola WiMAX Director Tom Mitoraj on Global WiMAX Differences (11/20/2007)
Q&A: Motorola WiMAX Director Tom Mitoraj on Widespread WiMAX Growth (11/12/2007)
Q&A: InterPro Translation CEO Ralph Strozza on Translation Tools, Costs (9/18/2007)
Q&A: InterPro Translation CEO Ralph Strozza on Globalization, Translation (9/11/2007)
Q&A: InterPro Translation CEO Ralph Strozza on Intercultural Translation Issues (8/7/2007)
Q&A: Madison Capital Partners CEO Larry W. Gies on Specific Country Issues (7/10/2007)
Q&A: Madison Capital Partners CEO Larry W. Gies Jr. on Cultural Differences (6/26/2007)
Q&A: Madison Capital Partners CEO Larry Gies on International Private Equity (6/11/2007)
Q&A: Scott H. Lang of S.H. Lang & Co. in Chicago on Foreign Deal Making (5/15/2007)
Q&A: Scott H. Lang of S.H. Lang & Co. in Chicago on Middle-Market M&A (5/8/2007)
Q&A: Scott H. Lang of S.H. Lang & Co. in Chicago on Middle-Market Firms (4/24/2007)
Q&A: George Filley of NAVTEQ in Chicago on Data Localization, Reach (3/27/2007)
Q&A: George Filley of NAVTEQ in Chicago on Partners, Personal Privacy (3/20/2007)
Q&A: George Filley of NAVTEQ in Chicago on Digital Mapping (3/7/2007)
Click for 2006 column archive.
Click for 2005 column archive.
Click for 2004 column archive.



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