TOKYO -- Japan's three biggest online brokerages are in a race to lower trading fees, opting to eliminate minimum charges levied on U.S. stock trades.
SBI Securities, Monex Group and Rakuten Securities charge a 0.45% commission on American stock trades, but the $5 minimum had applied to smaller transactions.
Monex sparked a chain reaction Thursday, when the company said it would lower the minimum to 10 cents.
Not to be outdone, Rakuten announced on Friday a minimum fee of 1 cent. The move blindsided Monex executives, who went on to match Rakuten's quote Monday.
But SBI, Japan's biggest internet brokerage, said Tuesday that it will eliminate minimum fees altogether starting July 22 for U.S. stocks and exchange-traded funds. Monex and Rakuten have decided to do the same.
The fee cuts will put pressure on earnings at the online brokerages, which collect commissions on handling U.S. equity and ETF trades, as well as for converting the yen capital into dollars. But the newly instituted discounts are expected to draw retail investors as U.S. stock prices are on the rise.
Many Japanese retail investors trade in small units, including single shares. At Monex, over 30% of the private investment accounts executed trades of less than 120,000 yen ($1,105), a proportion that rose above 50% when the company lowered the minimum fee to a penny on Monday. The total absence of minimum fees will be a boon to this demographic.
The three companies also have expanded their services regarding American shares. Monex will handle after-hour trades. Rakuten rebates 1% of the service fees as shopping points and offers U.S. exchange-traded notes.
This is not the first time brokerages slashed service fees at roughly the same time. A similar scenario played out for Japanese equities, individually managed private pension plans and margin trading.
"In areas where the impact on earnings is slight, [fee cuts] result in publicity for drawing customers," said Takayuki Hara, an analyst at SMBC Nikko Securities. "The companies are repeating the same pattern of uniformly drawing down fees."
The race to cut fees for U.S. stock trades reflects a cooling Japanese equities market. A customer survey by Rakuten Securities shows that American shares are viewed more favorably than their Japanese counterparts this year, a reversal of a trend that lasted from 2017 until roughly mid-2018. The number of respondents preferring U.S. shares remains high while the proportion choosing Japanese equities continues to shrink.
"Individual investors have reacted negatively to the yen's rise on the prospects of U.S. rate cuts, and they are being tempted by the U.S. stocks," said Satoru Yoshida, a commodity analyst with Rakuten Securities.