Robo-advisory Sarwa to roll out zero-commission trading service

UAE-based low-cost robo-advisory platform Sarwa, will roll out a zero-commission stock trading service within the next six months to tap demand for online trading, which has surged during the Covid-19 pandemic.

Sarwa Trade will allow retail investors to buy and sell global stocks and exchange-traded funds through the Sarwa app, co-founder and chief executive Mark Chahwan said on Wednesday.

"We made investing accessible [and] it’s time trading follows suit," Mr Chahwan said. "Many members of the [Sarwa] community are trading small amounts in companies they are passionate about, so we built this new service to allow them to do that in a safe and regulated environment."

Retail investors are increasingly seeking direct access to markets with the help of technology, leading to a surge in popularity for zero-commission trading apps such as Robinhood, eToro, Interactive Brokers and Sarwa. Demand for trading apps jumped during the pandemic due to monetary easing by the US Federal Reserve and other central banks, giving people more money to invest during pandemic lockdowns.

The recent GameStop trading frenzy, which saw the video game retailer hit a high of $483 at the end of January then plummet to below $100 a week later, led Robinhood to suspend trading in the stock. The phenomenon put the spotlight on online trading apps and raised concerns about their safety for novice investors.

A similar scenario is unlikely to happen in the UAE with Sarwa Trading, which will be regulated by Abu Dhabi Global Market and is currently in private beta mode, Mr Chahwan said.

“We've been around for three years and building our infrastructure for a long time in a very regulated, safe environment where we don't push this insane activity and all the hype,” he added.

“If you go on Robinhood, it’s super gamified and that’s not what we are doing. We are providing accessibility, simplicity and transparency and putting it into trading. Robinhood popularised the zero-commission model and we love the fee aspect and accessibility aspect of it … the gamification element, we are not sold on.

"We still believe the smartest way to build wealth is through regular, long-term, and diversified investing. That does not mean there is no place for buying and selling stocks, as long as it’s done responsibly, especially when it comes to themes you really believe in, whether it’s crypto, green energy, or innovative tech companies."

Founded in 2017, Sarwa Invest uses artificial intelligence to rate an investor’s risk tolerance and assigns them a tailored investment portfolio of exchange-traded funds, charging them lower advisory fees than traditional financial advisers and wealth managers. The FinTech platform currently has 25,000 registered users.

In January, Sarwa secured a financial technology experimental permit from Saudi Arabia's Capital Market Authority, allowing it to operate in the Arab world's biggest economy. However, Sarwa Trade will not be available to investors in the kingdom.

The FinTech platform is also about to launch a new funding round after raising $8.4 million in new financing in January 2020.

“It’s going to be in the double digits and we are targeting both regional and global investors to fuel the growth of the company and expand the team around the project,” Mr Chahwan said.

The funding round will close in the first half of the year, he added.