Matsui Securities - Company History

Matsui Securities goes back to May 1918, when six market speculators set up a rice brokerage in Tokyo trading under the Matsui name. In the same month it took a general membership of the Tokyo Stock Exchange and began dealing in shares as well; its shop crest — a six inside a circle — marked it as one of the very few Kabutocho firms old enough to carry one. It incorporated as Matsui Shoten in March 1931, took the name Matsui Securities in December 1947, registered as a securities dealer in August 1948, and joined the reopened Tokyo Stock Exchange as a regular member in April 1949. From there it held a small corner of Kabutocho with one unusual specialism: margin trading.

Small is the operative word. In 1987, among the hundred-odd regular members holding a seat on the Tokyo exchange, Matsui ranked second from the bottom by the number of equity orders it brokered. In the year to March 1995 it earned operating revenue of $22.3M (¥2bn) with 128 employees, and its share of brokered turnover on the exchange was 0.17%. What kept it solvent was the shape of its client book — roughly 70% of its customers traded on margin — and in a year when only 20 of Japan’s 222 securities firms managed an ordinary profit, Matsui was one of them.

The event that set the company’s next thirty years was not a strategy but an accident. Around 1986, trying to hold down payroll, Matsui compressed the commission element of its salesmen’s pay; five of its best sales managers walked out in protest and took the important accounts with them. With nobody left to sell, the firm fell back on newspaper advertising and waited for the telephone to ring. That same year the president’s elder daughter married Michio Matsui, a 1976 Hitotsubashi economics graduate who had spent a decade at the shipping line NYK on tankers and liners and had been secretary-general of its union at thirty. He took the family name and joined in 1987 — having originally made not inheriting the firm a condition of the marriage, and changed his mind only because his father-in-law had turned seventy and the company would otherwise pass to strangers. By 1990 he was managing director for sales, with the reform of the firm in his hands.

Made managing director for sales in 1990, Matsui almost at once banned solicitation by door-to-door salesmen, cut the sales force and the branches, and moved customers onto the telephone. In 1991 he advertised that the firm would not recommend individual stocks at all, and sold discount bank debentures to private investors at secondary-market yields — a move the industry attacked and he defended on the ground that individuals have as much right to the securities market as anyone. The rebuild cost him a single year of ordinary losses in 1991. He also rewrote what customers faced, cutting the minimum margin deposit from the ¥10 million the majors demanded to ¥2 million and the annual custody fee on securities from the industry-standard ¥3,000 to ¥1,000; a rival warned him he would be shunned by the whole business. In June 1995 he became president.

The real fight was over fees, and it began at the trade association. In January 1996 Matsui asked the Japan Securities Dealers Association to let it charge nothing for custody and was told that charging nothing could not be allowed. So in February it cut the fee to ¥100 for three years instead — free in all but name — and printed in its advertising that it would keep pushing prices down. The association gave way in late March, on condition the move did not spread to other fees, and the change took effect that April. In February 1997 Matsui halved commissions on over-the-counter stocks. Equity brokerage commissions were not fully deregulated until October 1999: on every fee it was legally free to touch, Matsui had already gone first. In May 1998 it launched Net Stock, Japan’s first full internet trading service, with internet margin trading alongside it, and in June 1999 it decided to accept equity orders online only.

On 1 October 1999, the day commissions were freed, came the Box Rate: a flat $26 (¥3,000) for up to three trades within a $26,353 (¥3m) turnover band, with the trade limit dropped in September 2000. The discount had been drafted at 70%; a single customer email saying he had overrated Matsui sent him back to rewrite it at 90%. Internet accounts went from 14,300 at the end of September to 18,800 a month later, and in November alone the firm brokered ¥197.9 billion of internet turnover with 140 officers and staff on the books. On 1 August 2001 it listed straight onto the First Section of the Tokyo Stock Exchange — no second section, no JASDAQ — raising $217.2M (¥26bn). The reason was mechanical rather than ambitious: 3% of a broker’s margin loan balance counts as risk assets under the capital adequacy rules, so the better Matsui’s core business did, the worse its ratio looked. It had slid from 365% in March 2000 to 302% a year later.

Listing was followed by the product that made the money. In July 2003 Matsui launched open-ended margin trading, which removed in practice the six-month settlement deadline margin positions normally carry. Balances passed ¥41.3 billion within two months and more than 12,500 customers were using it — growth the president called wholly beyond what he had expected. By 2004 Matsui was brokering more retail equity turnover than Nomura Securities, second only to E*Trade Securities, and its roughly ¥300 billion of margin lending was about three times Nomura’s. Operating revenue for the year to March 2005 rose 47% to ¥36.9 billion and ordinary profit 60% to ¥22.6 billion.

Underneath the record, though, the competition had changed shape. E*Trade ran the opposite strategy — thin margins and volume, with share of accounts, turnover and custody assets as the target — and led the race down on commissions. Matsui, fearing the effect on earnings, stayed out of it; its average commission rate in the year to March 2005 was 0.12%, more than double E*Trade’s, and the explanation offered at the time was that only a small minority of customers care about commissions alone. They did not. Price was precisely what individuals opening their first online account chose on, and by 2007 the gap in retail equity turnover share between two firms that had been level four years earlier had opened to more than three times.

Every counter-move fell short. In September 2006 Matsui made open-ended margin trading commission-free, but rivals had already cut to as little as 0.01% and the difference was too small to move anybody; customers did not come, commission income fell, and the offer was withdrawn that December. A distribution tie-up with the Resona group signed in May 2004 was dissolved in March 2006 because bank staff earned more selling investment trusts and pensions and never pushed it. Waiving IPO underwriting commissions, announced in 2005, produced two deals, because issuers avoided the untried. In the year to March 2007, SBI E*Trade earned ¥24.5 billion of ordinary profit against Matsui’s ¥22.7 billion — having stood at an eighth of Matsui’s profit only four years before. Profitability itself did not break: ordinary profit was still 52.0% of operating revenue, second among 26 listed brokers. The top line did. Operating revenue peaked at $491.1M (¥57bn) in the year to March 2006 and shrank to $221.8M (¥18bn) by March 2012.

In January 2013, as the margin-trading rules were relaxed, Matsui introduced One-Day Margin Trading: commissions, interest and stock-lending fees all waived, in return for positions closed the same day. The design was to earn on turnover rather than on the trade — the financing spread on money lent to customers, plus the fees charged on borrowed stock for short sales — so that the faster customers churned, the more the firm made at zero commission. The year to March 2013 brought the first rise in revenue and profit in seven years. The next was transformational: turnover of ¥39.5 trillion, 3.1 times the prior year; operating revenue up 1.9 times to $377M (¥40bn) and ordinary profit up 2.7 times to ¥27.2 billion; market share from 8.4% to 11.1% and margin-trading share from the 8% range to 16%. In February 2014 Matsui passed Rakuten Securities in margin trading.

The recovery changed what the firm was paid for. Because the trades migrated to the product that charged nothing, brokerage commissions themselves stopped growing: in the year to March 2016 turnover rose 6% while equity commissions were flat, and in the year to March 2017, as one-day trades went from 51% to 57% of the total, operating revenue fell nearly 20% to ¥27.7 billion. Earnings had moved to the financing spread and the stock-lending fees, both of which swing with the market and with demand to borrow. The commission Matsui charged when it first went online was 30 basis points, a quarter of the pre-deregulation rate; by around 2006 SBI had taken it to three or four, and by 2020 six out of ten Matsui trades carried no commission at all.

The rule that Matsui would do nothing but broker equities loosened from 2016, when it began distributing investment trusts and built its own portfolio-advice service to answer the wrap accounts of the face-to-face houses; a year later management conceded it was not reaching older investors and that balances were still only in the low billions of yen. Investment-trust sales commissions were abolished outright in December 2019. In June 2020 Michio Matsui stepped down after twenty-five years as president in favour of Akira Warita; holding 58% of the shares, he took neither the chairmanship nor a board seat, arguing that one representative is enough for any company and that dual rule does nothing but harm. Looking back on thirty years he said they had been full of failures, that the only consistent thread was throwing old things away, and that bringing internet trading to Japan had been no great feat — merely a copy of E*Trade in the United States. His successor started by re-examining what Matsui now was: a rebuilt smartphone app in March 2021 after younger users called the old one unusable; US equities in February 2022, a decade behind rivals; a new logo and website in December 2022 to shed the impression that Matsui was a face-to-face broker; and the MATSUI Bank service in October 2023. Operating revenue for the year to March 2026 reached $333.2M (¥53bn), second only to the ¥57.1 billion of March 2006, though ordinary profit of ¥23.8 billion still fell short of the ¥27.2 billion of March 2014.