eToro is a social trading network that aims to revolutionise the retail financial markets trading landscape. With 1.75 million online users claimed across 140 countries, and a Best of Show award in his back pocket from the Finovate Fall 2011 tech show in New York, chief executive Jonathan Assia tells Neil Ainger that the time has come to get social.

The electronic bull that eToro aspires to in its name is attracting 2,000 new account users every day, it says, and drawing millions to its online investment platforms and active social trading community. The social network's stated aim is to financially empower individual investors by giving them online access to its in-house developed instruction and trading tools for the currency, commodity and index markets. Research is shared among the community of users on the ‘crowd sourcing' model prevalent in social media circles. Effectively the aim is to integrate the social network into the trading platform and vice versa. 

"We have a simple offering that is based around peer-to-peer relationships, with online account holders who share information and trade using their own money on our systems, without any of the outrageous charges or complexity that you get with money managers, trading venues and other established market participants," says Jonathan Assia, the founder and chief executive of eToro, also known as Yoni, when explaining the firm's proposition. It does not charge any commission or fee on trades and is instead funded by the spreads (the difference between the ask and the bid prices of a currency pair for instance), which it says are competitive versus other liquidity providers at 4 pips for Sterling /US Dollars for instance, against industry norms.

"You lose that layer of lies, marketing and complexity that you often get with professional money managers," says the bullish Assia when seeking to define what makes his company different. "Eventually, I think, social trading will replace traditional exchanges and the established venues' complex web of managers, intermediaries and fee takers."

It's a bold statement for a 30-year-old to make but Assia believes that this sector has not had an iPhone-like revolution yet. "It's what we want to do. I want to change trading in the same way that the music industry has been revolutionised over the last decade by disruptive technology that has upended the old way of doing things," he says. The software industry will increasingly mirror the music industry he contends, citing the development of the online ‘on demand' cloud computing delivery model and flexible service orientated architectures that can be tasked at will by users as evidence of the coming revolution. "The social internet and trading will be key part of the changeover." 

Having been one of  the nine ‘best of show' winners, out of 63 entrants, at the recent Finovate Fall show in New York, and won in the European event earlier in the year, Assia also thinks that eToro has the outside validation to prove that its technology works and that social trading can be a disruptive force. This two-day financial technology show, born among San Francisco's techheads, seeks to highlight the newest products and services that'll help you manage your money better or assist you in making better decisions for your company. Each start-up company gives a seven minute demonstration to an audience of approximately 1,000 investors, bankers, analysts and fintech advocates. The ‘best of show' are voted for, alongside much real-time tweeting and blogging. Those who present the best tend to win of course, so there is no guarantee as to who will actually go on to make it big (rather than just talk big). Finovate show alumni include Mint.com, the online personal finance software firm that allows people to see all their financial accounts in one place to ease management, and Prosper, the peer-to-peer lending website that is America's equivalent of the UK's trailblazing Zopa.

These P2P social lending networks are a good illustration of the challenges ahead in breaking into financial services in a major way because, although successful, Prosper and Zopa remain niche businesses. It's too early to tell if Assia's right about whether the similar social trading model has a bright future or will end up as an interesting curio. Other players interested in social networking, reporting, research and online trading, such as Saxo Bank, SEB's the Benche community and Stocktwits among many others, are all involved in this nascent field, hoping to benefit as the social media wave washes over the sector.

All traders on the social trading network are rated out of five stars for their performance. The website's Open Book social trading platform mirrors Facebook in many ways with catchy logos, showing dollars or an oil drop depending upon what you're trading, housed alongside trader pictures, flags of origin and interactive forums.

The new CopyTrader function allows the best traders to be followed by novices who can copy a percentage of their trades or their every move. These so-called expert ‘gurus' gain $10 for every person who follows them and the kudos of being a ‘top trader', says Assia. "The CopyTrader tool is designed for the cut and paste Generation Y population who haven't got the time to do the necessary research but still want to sit back and earn returns." The related CopyMe in-house developed software is effectively an online store and forum for the gurus.

"What we're all about is moving from instrument-based trading to people-based trading." You don't have to worry about a lack of diversity in your portfolio either, reckons Assia, as he says "you can follow a gold trader with us, a foreign exchange trader, an index, derivatives trader, CFD specialist or whatever you want. If you follow five different specialist traders with us you've got diversity." 

A full validated history of traders' actions on the site is kept to encourage full transparency and openness, something that Assia, and his co-founding brother, David, who is the chairman of eToro, believes has gone missing on traditional trading exchanges and venues, although users' history outside of eToro is not of course accessible. "We're the opposite to the world of black box High Frequency Trading where the algorithm is all. That world is inherently opaque, we're not." 

Social trading has the power to democratise investment banking and retail trading activities, believes the 30-year-old revolutionary who spent his teenage years trading foreign exchange, building websites because he was so into computers and dabbling in a spot of light ‘ethical' hacking for fun as he sought to work out how computers and programmes worked. The New York City native, who studied in Israel and bounced between the two countries (see CV at the end of this article) is now married with a young son, Adam, and settled but he still bears the imprint of his wilder days, quoting the father of modern economics Adam Smith when he says he wants to make capitalism a force for good again in line with the great man's original theories. "It's got too esoteric and technical," he says. Isaac Newtown is also referenced by Assia, who gained his MSc qualification at the computer science Interdisciplinary Center at Herztelia in Israel in 2007, when he explains that the social internet could be as big as science and religion: its shared knowledge and power allowing people around the world to ‘stand on the shoulders of giants' and innovate.  

The mobile channel will play a key role in the development of social networking as well, due to the increasing popularity and power of smartphones (see boxout at end of this article). "Mobility is a key concern for us and we're delivering that functionality to our online trading community with our new iOS and Android compatible rollouts," explains Assia.  

"Professionals do use the site as well," he insists, "as they're interested in our real live trending data and in the analytical metrics that we can provide about traders and trends. Some big FS firms won't reveal money managers performance because they're losing money, but we will. We do full disclosure." Anyone who loses too much money, however, won't last long in a professional job. "The point is that we've all seen old ladies or committed investor groups looking after their pension pots outperform the professionals," says Assia. "The regular squid beats the vampire squid, if you like." Social trading makes this fact plain and exposes those who shouldn't be in the markets.

An affiliate programme is available to good eToro assessed partner professionals who bring traffic to the network. The similar eToro IB broker programme is effectively a white label service designed to attract flow in quite a traditional manner through rebates and other inducements to liquidity makers - nothing especially revolutionary here. 

After spending his teenage years dabbling in online forex trading, before going on to study for an MSc, Assia set up his own company in his twenties. CD Ride offered on-ride videos to customers at American theme parks like Six Flags, Universal and other such attractions. Kodak brought the company in the end - proving its success, says Assia, although he candidly admits the initial attraction was just because he loved roller coasters.

"I started trading when I was 16 years old," says Assia. "Friends used to ask me back then where they should go to trade, to get research and find the best tools. Now I can simply send them a link," says the 30-year-old. "eToro validates the history of our traders on our platform and shows their performance metrics, how many people are following them, their fellow user ratings, and so forth, while also offering online educational tools, crowd sourced data and live trading tools." It's a one-stop-shop believes Assia. "People say to me that the future is social media: No, I say, the present is social media. It's here, as we have proved. The future is uncertain but it's exciting and we are in at the beginning of the social revolution."

Boxout: eToro launches mobile HTML5 app for social trading
The social trading network eToro has launched a mobile web application giving its online traders the freedom and flexibility to trade currencies, commodities and indices on the move.

Based on HTML 5 and running on the eToro OpenBook social trading platform, the mobile app supports all devices that use the Android operating system, including tablets, and it supports iOS from Apple, covering the iPhone and iPad. HTML5 also means that Flash-like functionality will finally be available to eToro and other users on Apple devices after the firm stubbornly refused to license Adobe's Flash products. 

eToro's mobile trading application can provide traders with real-time feeds of live traders' positions, via the CopyTrader function on its social trading website which allows users to follow well rated ‘five star' traders and copy their investment portfolios. A fee of $10 is paid to every follower a star trader attracts. Profit updates and live streaming prices for all the supported products online, covering FX, commodities and indices, are also available on the new mobile app, alongside the ability to monitor account balances and margins and to place market and pending orders.

Talking exclusively to Banking Technology ahead of the launch, Jonathan Assia, the founder and chief executive of eToro, explained that mobility is very important and a key concern for the firm. "As pioneers in social trading, we believe it is essential to provide our traders with the latest innovations for anytime, anywhere access to their trading account and the eToro OpenBook social trading community," he said. "Developing our app in HTML5 is aligned with our mission to continuously innovate and lead the field. We are proud to be one of the first movers to adopt HTML5 to create state-of-the-art web applications that deliver a great mobile user experience.

"The ability to use any mobile device to sync up with market gurus, keep a pulse on price movements, and decide which trades and traders to copy is an extension of eToro's promise to provide our customers with full transparency and control over their investment portfolio," he added. 

eToro is a  Cyprus-registered company owned by RetailFX which provides its brokerage services in Europe under the MiFID rules. Foreign exchange was the first market offered when it launched in 2007, but commodities like oil, indices and other instruments across various asset classes are also now available. IC Markets provides the broking services in Asia, with FX Solutions serving the US subsidiary in America. Assia maintains that eToro's history and structure are sound with licenses from all the relevant national regulators where it operates. He also points out that Spark Capital - a supporter of Twitter - is a major investor, having pumped in $8.3 million this year along with other well known tech investment firms.  

Curricululum Vitae: Jonathan Assia, co-founder and chief executive of social trading firm, eToro.

2007 - Present: Sets up eToro with his brother, David, after spending his teenage years dabbling in building websites and online forex trading. FX still forms the bedrock of the online social trading network, which has 1.75 million members across 140 countries, but eToro has since diversified into commodities, where currency speculation for hedging purposes is vital, plus indices, derivatives and many other markets. "Friends used to ask me where they should go to trade, to get research and find the best tools. Now I can simply send them a link."

2000 - 2007: Assia establishes his first company in his twenties. CD Ride offered on ride videos to customers at American theme parks like Six Flags, Universal and other such attractions. Kodak brought the company in the end proving its success, says Assia, although he candidly admits the initial attraction was just because he loved roller coasters.

Interests: Roller coasters, programming, science and computers. 

Education: BA in management and computer science at the Open University, Tel Aviv, graduating in 2005. Assia went on to gain an MSc computer science qualification from the Interdisciplinary Centre (IDC) at Herztelia in Israel in 2007. He also is a Microsoft Certified Solutions Developer.