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12 August 2019 (Monday)

Trading startup Open Traders raises $70 million in a new funding round

Commission-free trading startup Open Traders has raised $70 million in a round led by billionaire Simon Chong’s investment group The Leap Ltd, valuing the company at $800 million.

Forrest Capital and The Bank of Sincara also invested, the spokesperson for Open Traders stated on Monday. Existing investors RHS, Orange Capital, and Valiant Media Group participated in the round, which brings the total raised by the startup to $102 million.

Open Traders allows retail investors to trade in stocks, Exchange Traded Funds (ETFs), and index futures through a user-friendly app. They do not charge any commissions for trades. Instead, they earn their profits through market-making. It competes with established brokerages, which charges clients for commissions.

It seeks to be the preferred brokerage by offering a superior trading platform with $0 commissions for trades.

“The company is continuing to expand and the opportunity to refinance the company for further growth was there so we took it. We seek to be one of the best market-maker in the near future,”

Beverley Higgs (Chief Executive Officer of Open Traders) said.

Open Traders’ funding comes as established brokerages continue to face competition to lower their trading fees for the investors.

Ann Parreira, Sicara Times

Chris finished reading the article while he was on the train to work. He started delving into this particular piece of news.

“Hmm... So what the manager wanted me to do, resulted in this? I guess I had a hand in Open Traders getting the funding. He said I could possibly be promoted to a team leader after this project. But, I was still in the same position in November. What had happened?”

He started to look through his work calendar to look for anything related to Open Traders. There was something that felt amiss to him. He could not quite put a finger to it. There was nothing illegal related to Open Traders. Looking through the tasks and projects completed for the months of June, July, and August, he found a few entries to do with this company.

26 July (Fri) - Open Traders Report’s Review with Henry

25 July (Thurs) - Open Traders Report Submission

18 June (Tues) - Open Traders Report Allocated

It is about 2 weeks from now when Chris will be having the review with his manager, Henry. If there were any doubts about this, he would have to solve the puzzle within this period.

11 August (Sunday)

Chris was in his room after dinner. Sitting on his gaming chair, he was not gaming as he usually does on Sunday evenings. Instead, he was looking at news sites, frantically searching for any pieces of news related to Open Traders. He remembers reading about a young university student committing suicide because of the financial losses suffered on the Open Traders trading platform.

He searched through the news from January 2019 to August 2019 but there was absolutely nothing about any suicide related to the company.

“It is probably after the funding round. Open Traders became the number 1 brokerage sometime in October. The number of users must have swelled from September. It’s 11 August. It’d be futile to find any news from the future. I am sure it happened.”

He stared at the screen and trying really hard to recall. Then, a flashback came.

“A 23-year-old student was suspected to commit suicide at home due to heavy losses from the stock market...The initial account of $5000, chalked up unrealized losses of $200,000...Experts warned of more tragic cases to come, wants regulators to step in...” Chris recalled bits and pieces of information regarding this suicide.

Chris stood up from his chair and went to the kitchen to get a drink.

Paul (Chris’s housemate) was making dinner in the kitchen. Chris tapped him on his shoulder.

“What’s cooking mate?”

“Tofu Steak. Not for non-vegans like you.”

“Yeah, no thanks. What are you busy with these days?”

“Invention...Inventions. Not as if you’d be interested.”

“Anything that can make me rich?” Chris laughs.

“Hmmm... maybe it’s more than that.”

“Anyway, Paul, have you heard of Open Traders?”

“Is it something to do with the stock market?”

“Yes.”

“Nah, I am not interested in the financial markets.”

“Ok... Do you think that I am in a different reality to you now?”

Paul looked at Chris with a deadpan look. “Perhaps. It doesn’t matter. It wouldn’t alter my life. Not that I would allow it to. That’s a lot of talking Chris. I need to eat now. Bye.”

“Alright. Cheers.” Chris walked into his room with a bemused look on his face.

“What is happening today is not exactly what has happened previously. Reality has been altered. Does Paul know of him being in an altered reality? One that was altered by me? Or is everything in a simulation?” Chris wandered.

“God knows.”

He sat down on his chair and wrote in a notebook.

Title: “Is there anything dirty about Open Traders?”

If Yes, what are the possibilities? He started to write down a number of possibilities that he could think of.

1. Insider trading (Acquisition of the company’s shares before key announcements)

Open traders are not listed yet in my memory. This might be unlikely to have benefited the key players in the company.

2. Unknown sources of income

Any money made besides earning as a market maker? Other undisclosed businesses? (Don’t know yet)

3. Money Laundering

Not sure how to prove it if there is. If users want to launder money through the trading app, it is possible. They can buy and sell different trading products. Cash out the profits or losses when they close their trading positions. It’s possible though large transactions will alarm the SCS. (Securities Commission of Sicara)

Next, he focused on the suicide case linked to Open Traders. He wrote down the following.

Reasons for the significant losses

1. Overtrades: He probably traded numerous times and the losses piled up. But, if there is no leverage involved, he couldn’t have possibly lose a few hundred thousand. If he bought $5000 worth of a product, even if they are worth $0 when he sells it. The losses would just be the $5000 +trading fees/commission.

2. Leverage: Or rather over leverage. There is definitely leverage involved to lose so much more than the initial capital. How much leverage??? 5/10/20/50/100 times? That’s a key.

3. Overtrades+Overleveraged: High possibility. Probably trades so frequently and all trades are leveraged. The losses piled up.

4. Unqualified investor/speculator: The lad probably knew little about the markets. It became a gambling addiction. No clue at all? Possible. Trading on tips? Possible. Blind faith in his trades? Possible. SCS requires new traders to go through some online questionnaires for certain financial products. He probably read on them and cleared them through academic knowledge with no real trading experience.

Chris spent the night looking at his notes and thinking about Open Traders and the young man’s suicide. This was the most challenging puzzle for him up until this point in time. Before he switched off the lights, he took a look at his calendar. There was only 1 entry for the week before.

3 August (Saturday) - Elly (David) Bday Dinner

“Elly’s birthday is not on the 3rd. Oh, that’s David’s birthday. Ahh...interesting. I can find out something from the king.” Chris mused.

He tucked into bed and tomorrow will be the day before.