Online futures trading grows along with industry fears

By Kyaw Phone Kyaw   |   Wednesday, 08 April 2015

Online futures trading is taking hold, though the potential for losses is large and trading should be properly regulated, experts warn.

Myanmar people with internet access are able to sign up with a number of local companies that provide online trading platforms. Users can then make trades on futures markets in foreign countries, such as Thailand, Singapore and New Zealand.

At their most basic, futures contracts are agreements to buy an item, such as a commodity, at an up-front price, with delivery at a later, specified date. The contracts are then often heavily traded on international markets, as the underlying item changes in value before the delivery date.

U Zaw Min Tun, managing director of Myanmar Golden Link Trade Company, said there are now five or six local companies that are allowing trading on international futures markets.
When signing up, clients must deposit a start-up amount, usually between US$3000 to $10,000, with the broker companies.

The firms then allow electronic trading on international commodities markets including Indonesia, New Zealand, Thailand, Taiwan and Singapore via mobile apps and computer software.
“Sometimes they [the brokers] say they are authorised by foreign countries, but the question is how they are authorised and whether their mother company from overseas is really operating legally or not,” said U Zaw Min Tun.

Some companies are indeed legal subsidiaries from foreign companies, though clients must be careful to make sure they are covered and that they have legal recourse, he said.
“If the clients invest in them before they ask these questions, problems come when they lose all their money,” he said.
U Zaw Min Tun said he would like to establish a futures market broker named Victory International Future Company, but added he wants legal certainty for the futures market sector and a regulatory body to be formed.
He also highlighted problems, such as a company in Mandalay claiming that for every K150,000 invested by its clients, it would repay K10.8 million, which collapsed shortly afterward.
The growth in these companies allowing clients to trade futures comes as some say the business is largely unregulated.
U Ngwe Thein, a business consultant, said the futures market can be very complicated to understand, with many people not having enough knowledge of how it operates to take part.

“People might be cheated,” he said. “The government has to regulate the rules and laws, and also increase awareness and conduct a lot of training and workshops.

“Now there is no transparency at broker companies. If the government doesn’t make specific and concrete laws and raise public awareness, they [brokers] may cheat the law.”
Myanmar is still at the early stages of setting up modern markets. It has created some of the legal background necessary to launch the Yangon Stock Exchange later this year, though the YSX is intended for selling company shares rather than buying and selling commodity futures.
Private companies have also announced plans to start modern commodities markets in the country, though they will be some time coming.
The local establishment of brokers allowing online commodities trading in foreign markets is a new phenomenon.
The Myanmar Times spoke with representatives from two private companies, Inter Pan Myanmar and Asian E-Trade Consultant Company, which offer these services.
Inter Pan Myanmar financial adviser Ko Mynn Nyi Nyi said they have been providing services to Myanmar clients to invest in Myanmar’s futures market since receiving a company licence from Myanmar’s Directorate of Investment and Company Administration in August 2014.
Ma Myat Myat, an employee of Asian E-Trade Consultant, said it provides access to New Zealand’s futures market for its local clients.
Clients who have jointed Asian E-Trade Consultant say it has been a difficult business.
Two clients, requesting anonymity, told The Myanmar Times they made $10,000 deposits to set up their accounts, and had generated $2000 in profit within two or three months – however, sometimes they see sharp losses. One client said he also pays steep service charges for having the account.
Inter Pan’s Ko Mynn Nyi Nyi said there is a distinction between investing in securities and investing in commodities, arguing that futures trading is more secure.
“If the client invests in a security exchange, after that they can only pray to their God,” he said. “Investments in futures is not like that. The decision is up to themselves and is just like playing a game.”
Ko Myin Nyi Nyi said he was looking for clients looking to make money, rather than “buying a car or opening a restaurant”.
Others urged more caution, however.
U Zaw Min Tun said it is even unclear if their deposits are actually being invested into futures markets or if results are merely replicated and paid out locally.
He also said that there should be more oversight and knowledge regarding futures trading.
“There is no approval,” he said. “But in Myanmar there aren’t always lots of opportunities for investments – that’s why we throng to every investment opportunity.”
While many people are joining up, others say they are more cautious.
Daw Mya Kyin is interested in investment opportunities, such as the futures market, but has decided to watch the situation and has not made a final investment decision just yet.
Several government officials declined to comment on official oversight of these online brokerage companies when contacted.
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