Cayman Islands: The Internet: Changing The Way The World Invests

Last Updated: 20 November 2001

Technology has transformed the world faster than many of us ever thought possible, and continues to change it at a rapid pace. Nowhere is this revolution more evident than in the securities industry. The Internet has empowered individual investors with easy and convenient access to information and financial markets at nominal cost and is dramatically altering the way they manage their finances and participate in global securities markets.

The rise of Internet trading is even more astonishing when you consider that the first online brokers did not appear until 1995. Today, roughly 40 percent of all individual investors' trades are entered online, up from 17 percent in 1997. Over the next few years, experts predict that nearly all investors will use the Internet to access their financial accounts in one form or another—whether it be to research investment opportunities, trade securities or view account statements online. The Internet continues to evolve as the dominant delivery channel for financial services.

Online trading is affecting the securities markets in a number of dramatic ways. Investors can collect, sort, and analyze vast amounts of data using the Internet. To a great extent, this access to information serves to level the playing field between retail and institutional investors. The ability to receive information almost instantaneously has fueled an insatiable demand for it from investors. Sophisticated research tools and access to real-time quote information are becoming commodities that online brokerage firms must offer in order to compete. As the battle for market share among brokerage firms intensifies, we can expect more research tools that were formerly the domain of institutional investors to become available to the retail segment of the market.

Technology is also driving globalization as well as serving to blur the distinctions between discount and full service financial services providers. The continuing globalization of the securities industry has provided vast new opportunities for markets, firms and investors. While historically American investors have shown little interest in foreign securities, within the past ten years investment capital has moved beyond U.S. boundaries at unprecedented rates. In 1990, the large growth in U.S. investments in foreign securities was led primarily by institutional investors seeking higher rates of return as a result of low interest rates and slow corporate earnings growth in the United States. Individual investors also began to recognize that they could reduce investment portfolio risk by diversifying holdings to include foreign securities. Advances in technology and telecommunications allowed money to move instantaneously from country to country, making the world a smaller place in which to conduct business. Investors worldwide could easily and quickly purchase and sell securities in various national markets. As a result of these developments, global markets are becoming more important to U.S. investors while U.S. markets are increasingly important to foreign investors. According to numbers from the Securities Industry Association, U.S. holdings of foreign securities reached $2.1 trillion at year-end 1999, up 31% from the then record of $1.6 trillion in 1998, and up 113 percent from four years ago. Foreign holdings of U.S. securities hit $3.7 trillion, up from the then record $3.4 trillion in 1998 and up 97 percent from four years ago.

While leveling the playing field for investors, technology has also enabled relative newcomers to break into and thrive in an industry dominated by traditional securities firms. Upstart discount brokerages equipped with state-of-the-art technology are now capable of competing successfully with large, established full service brokerage houses. The discounters have the technology, flexibility, price and speed of execution to compete with full service brokers in the online arena, while the full service brokers have built a successful business providing a comprehensive range of services and offering investment advice. Technology has enabled the distinction between the two to become less evident, as most online firms have expanded their offerings of research and real-time news and information as well as financial planning tools, while the full service brokers have developed online trading capability and have adopted pricing models to compete with the discount brokerage firms. The competition brought about by the advances in technology has served to benefit individual investors enormously.

The phenomenon of online trading that began in the U.S. is now spreading around the world. Global investors are becoming more accepting of Internet technology and are increasingly comfortable with the security that is in place. As a result, they are more willing to manage their investments online. As stock market growth in Western Europe and Asia has provided a strong platform for wealth creation, just as it has in North America, we can expect to see strong demand for online brokerage services in these regions over time. Recognizing that the international investment community has a need for convenient, efficient and secure access to global markets via the Internet, SEGOES has introduced new services to meet these needs.

SEGOES provides private investment corporations and international individuals with the ability to trade stocks, bonds, options, mutual funds and private placements electronically on the U.S., Canadian, London and Frankfurt stock exchanges from a single account. We are very excited to announce that by early 2001, SEGOES will offer access to major Asian markets as well. To support this enhanced global focus, SEGOES has recently launched a completely redesigned website, offering real-time quotes, research and charts on the global markets we support. SEGOES Securities, Ltd. is a member of the Cayman Islands Stock Exchange and is subject to strict rules governing its conduct and operation. In addition, each account is protected up to $100 million.

SEGOES is fortunate to be based in Cayman, which has positioned itself to become a leading e-business center and has enacted new e-commerce laws to help ensure success in this arena. SEGOES has the speed and flexibility to seize new Internet commerce opportunities and meet the ever-changing needs of international investors and we fully intend to expand our reach worldwide.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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