Toss Securities, which launched an overseas stock options service for individual investors, is heavily promoting phrases that spur options trading. Critics say the sensational images, which highlight only the high returns of high-risk derivatives, are luring investors.
Stock options trading refers to trading the "right" to buy or sell a specific stock at a set price in the future. Options are one of the high-risk derivatives; with a small amount of capital, large transactions are possible, creating a strong leverage effect, but the risk of loss is also very high. In particular, in a short options position, losses can exceed the principal invested.
Toss Securities on the 3rd launched an overseas stock options trading service for some preregistered users. Starting on the 10th, it will expand the service to all customers. This is the first derivative product introduced since Toss Securities received approval in Feb. from the Financial Services Commission (FSC) for "on-exchange derivatives investment brokerage."
However, the ads Toss Securities rolled out to promote its overseas stock options trading service are drawing controversy. On its mobile trading system (MTS), Toss Securities used front-and-center phrases emphasizing high returns and entertainment value, such as "If Nvidia rises 5%, the option price rises 214%" and "Next Friday, will Pfizer's stock go up or down (betting)." Critics say that despite being a high-risk derivative product, the ads play down investment risks.
Some users criticized this, saying, "Even for Toss, which wields a user-friendly user interface (UI) as a weapon, introducing options as a 'heads-or-tails game' crosses the line," and, "They put derivatives alongside stock ticker information, making them look like stocks."
Previously, Toss Securities drew in beginner investors in their teens and 20s by leveraging an easy MTS and a simple user interface (UI). According to Toss Securities, as of the end of Aug. this year, one out of every three users was in their teens or 20s. Among investors, this is why there is criticism that the company is peddling options to so-called "stock kids" (stocks + kids).
An official at a securities firm said, "Toss Securities has a strong base for attracting beginner investors, and it is dangerous to introduce complex derivatives to this customer segment like a game," adding, "While they say they are lowering the barrier to entry for high-risk products like options, in reality it is largely marketing to secure new investors."
Toss Securities is also facing controversy over "trick marketing" regarding its overseas options preregistration event. Starting in Dec., investor pre-education and completion of paper trading will be mandatory when trading overseas derivatives. Last month, one month before this system took effect, Toss Securities held an event offering up to 3 million won in investment support funds to preregistered customers.
Customers who experienced trading in advance through the preregistration event can skip the mandatory procedures. This is why there is criticism that the company moved to secure new customers right before the regulation took effect.
In response, Toss Securities said, "Support for derivatives trading has been a project pursued since last year and was arranged before authorities decided to mandate pre-education," adding, "Through the MTS screen, we provide detailed guidance on investment risks and key features of options, and we do not support short positions that can generate losses exceeding the principal."
Meanwhile, in Nov. last year, Toss Securities was ordered to correct by the Financial Supervisory Service for describing "margin trading on credit" (misu georae) as a "purchase on credit." At the time, Toss Securities explained, "The intent was to explain difficult financial terms in simpler language," but financial authorities noted that the expression could lead investors to underestimate risks. Margin trading on credit is a trading method in which an investor borrows funds from a securities firm to buy stocks, commonly called "trading on debt."
Toss Securities said, "After reviewing customer feedback, we have temporarily suspended the options simulation page and additional preregistration events."