Key message:

Online trading offers a convenient means to investors to trade securities. However, losses may arise from investors' misunderstanding of the dealing procedures. So the best way to avoid the pitfalls of online trading is to learn all that you can about the process.

The internet has become an indispensable part of our daily lives. We rely on it in all sorts of ways - from shopping online, booking cinema tickets to reading newspapers. It has also transformed the way investors trade stocks and, even make investment decisions. But while online trading is getting more popular investors need to think hard before they make their investment decision and to remember the basic rules.

Whether you trade securities through a bank or an online brokerage, your online orders (including those sent via hand-held devices like mobile phones) are routed to the Automatic Order Matching and Execution System (AMS) of Hong Kong Exchanges and Clearing Ltd (HKEx). Since online orders can be automatically fed into the trading system for execution and confirmation (without manual processing), online trading is usually cheaper.

Different models of online brokerages

There are a number of business models available to companies providing online brokerage services. The list below offers some examples:

Model Description
Traditional / on-line brokerage combination ("clicks and mortar") A traditional brokerage offering on-line brokerage service as an alternative channel to trade. A two-tiered fee structure is usually adopted (one tier for on-line trading and the other tier for off-line trading).
Traditional brokerage with a separate on-line brokerage A traditional brokerage creating an on-line brokerage subsidiary or associate.
Virtual brokerage A pure on-line brokerage offering all products and services on-line.
Bank with on-line brokerage service A bank providing on-line brokerage service as part of its on-line banking business.
Alliances among brokerages Brokerages forming a strategic alliance to provide a centralised or linked platform for investors to trade on-line.


Apart from securities dealing, some online brokerages provide additional services which may include margin financing, securities borrowing and lending, and after-hour trading. Be sure to understand the nature, terms and conditions, fees and charges and operation procedures of these services before you use them.

Other services offered by online trading platform

In addition to trading local and overseas securities, you may also access news, corporate information, stock quotes, research and analytical tools from the online trading platform. The convenient access to information online often means you can make investment decisions more quickly, possibly resulting in more frequent trading on your part.

Proper investment attitude

While using online systems is simple and fast, you need to take time to ensure your investment decisions are appropriate. You also need to have reasonable and realistic expectations about the prospects of your online investment, and carefully consider the risks as well as potential rewards.

7 December 2017