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?
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?
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?
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
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
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?
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.
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.?
offer education in all markets as a core offering. We have an
aggressive schedule of live interactive localized and archived
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
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).
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?
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?
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.
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?
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?
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.
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?
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?
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 firstname.lastname@example.org.
Click here for Muth’s full biography.
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Click for 2006 column archive.
Click for 2005 column archive.
Click for 2004 column archive.
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