Tencent-backed online trading platform Futu presses ahead with Singapore, US expansion plans

Li said the big potential of the US market was a part of the motivation behind Futu’s decision to start its expansion in America, where “we are aiming to gain at least a few million users”.

“We completely relied on our third-party service provider Interactive Brokers for our US operations before we started our own company and received the US licence,” Li said.

In the US, Futu is building its own clearing channel, which will be launched next year. This will allow the firm to provide clearing, settlement and asset custody services to users independently.

“Since the beginning we have aimed to become the Chinese version of Charles Schwab, but version 2.0,” said Li, referring to theUS financial conglomerate that has grown from humble beginnings as a stockbroker to managing US$6.4 trillion of client assets.

One of mainland China’s earliest online brokers, Futu has grown rapidly since its founding in 2012, allowing Chinese investors to trade stocks offshore in places like Hong Kong and the US. Futu now has more than 1,100 employees and occupies three floors next to Tencent Holdings’ headquarters where Li worked for eight years from 2000 as the 18th founding employee.

Futu’s market value too has risen, reaching US$5.5 billion as of December 23, since its initial public offering in March 2019. It was boosted by a surge in online trading during the coronavirus pandemic, as retail investors stuck at home during extensive lockdowns worldwide actively traded equities.

The online user base of equities trading apps has ballooned in recent years in China, recording double-digit percentage growth from 2016 to 2019, according to consultancy iiMedia Research. It is forecast to grow at 16.2 per cent to 129 million users in 2020, it said.

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“We believe that the increase in US-listed Chinese companies seeking secondary listings in Hong Kong and the surge of high-profile Hong Kong IPOs will act as major tailwinds to our growth,” Li said in August after the company posted a fourfold year-on-year increase in first-quarter profit.

Looking ahead, Li said that the plan was to increase spending on marketing and advertising to grow the user base, as more than 50 per cent of new clients during the pandemic came via referrals from existing clients. There will be a particular emphasis on Hong Kong, said Li, without elaborating.

Already the company’s costs have risen significantly this year, surging 160.9 per cent to HK$182.1 million (US$23.5 million) in the third quarter from the same period a year ago.

“The sheer number is relatively big, but the cost per client is not high,” said Li.

The marketing push will pay dividends, he added.

This article appeared in the South China Morning Post print edition as: Futu targets U.S. as it nears Singapore open