Entering margin trading after refusing it on principle (2002)

Dropping the principle, keeping the brake

Not handling margin trading was, for Monex Securities, a matter of philosophy and of profitability at the same time. Having excluded it on the ground that it can become a form of trading disadvantageous to individual investors, the company stood first in customer numbers and client assets while falling short of the firms that offered it on executions — and was left with an operating loss of ¥1.24 billion in the year to March 2002. When the merger with DLJdirect fell through, there was no longer a route that preserved both the principle and the economics. What Matsumoto put down was the principle of not handling it.

Entry did not change the results at once. Margin accounts numbered about 4,000 at the end of March 2003, short of the 10,000–20,000 the company had set out, and seven or eight in ten customers had never traded on margin. Matsumoto said he wanted to hold margin trading to 50–60% of executions, which suggests he had no intention of leaning the revenue mix toward margin the way rivals had. Having decided not to place margin trading at the centre of earnings, the economics could only be improved by scale. The combination with Nikko Beans the following year was the decision to buy that scale from outside.