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spk02: Hello, ladies and gentlemen. Welcome to Futu Holdings' third quarter 2020 conference call. At this time, all participants are in a listen-only mode. After the management's prepared remarks, there will be a question and answer session. Today's conference call is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the conference over to your host for today's conference call, Mr. Daniel Yon, Chief of Staff and Head of IAR at Fuku. Please go ahead, sir.
spk08: Thanks, operator, and thank you for joining us today to discuss our third quarter 2020 earnings results. Joining me on the call today are Mr. Leif Leith, Chairman and Chief Executive Officer, Officer Chen, Chief Financial Officer, and Robin Xu, Senior Vice President. As a reminder, today's call may include four looking statements, which represent the company's belief regarding future events, which by their nature are not certain and are outside of the company's control. Forward-looking statements involving hearing risks and uncertainties. We caution you that a number of important factors could cause actual results to differ materially from those containing any forward-looking statements. For more information about the potential risks and uncertainties, please refer to the company's filings with the SEC, including its registration statement. With that, I would now turn the call over to Leif. Lee will make his comments in Chinese and I will translate.
spk03: Hello everyone. Thank you for joining the earnings call today. I am excited to share that we continue to deliver outstanding operating and financial results in the third quarter of 2020. The number of our competitive real estate customers has reached a new record. The number of our competitive real estate customers reached a new record. The number of our competitive real estate customers reached a new record. The number of our competitive real estate customers reached a new record. The number of our competitive real estate customers reached a new record. The number of our competitive real estate customers reached a new record. The number of our competitive real estate customers reached a new record. Our net paying client addition is approximately 115,000, bringing the total number of paying clients to over 418,000, up 137% year-on-year.
spk08: This marks our highest quarterly paying client addition. Our China mainland and Hong Kong paying clients both experienced triple-digit growth in the quarter, driven by a number of industry tailwinds, including continued market volatility and the surge of high-profile Hong Kong IPOs. Organic growth continued to contribute over half of our new paying clients. During our second quarter earnings call, we guided for 280,000 net new paying clients in 2020. We are well on track to deliver this guidance.
spk03: Customer assets have also grown strongly. As of the end of the quarter, total customer assets reached about 2,011 Hong Kong dollars, which increased by 178% compared to the previous year, and increased by 41% compared to the previous year. There are 41.8 million Hong Kong dollars of household assets of existing customers, which increased by 17% compared to the previous year. There are more than 98% of existing customers in the seventh quarter.
spk08: Besides total paying clients, we also witnessed robust growth in total client assets. As of quarter end, total client assets reached 201 billion Hong Kong dollars, representing 178% growth on a year-on-year basis and 41% growth on a quarter-on-quarter basis. Average asset balance for paying client was 481,000 Hong Kong dollars, up 17% year-on-year. Our quarterly paying client retention rate surpassed 98% for the seventh consecutive quarter.
spk03: In the third quarter, our total total transaction rate broke 10,000,000 Hong Kong dollars for the first time. The same rate went down by 381%. The total total transaction rate of each share accounted for 56%. In the third quarter, we launched a trade of Hong Kong-based stocks and a trade of various derivatives, including Hong Kong-based stocks and MSCI index stocks. In this quarter, Yanshengping jiao yi de shichang fen er qu de le xian zhu tishen. Zai mang wei lai, women jiang jing yin bu feng fu Yanshengping ping bei.
spk08: Total trading volume in the quarter surpassed the HK$1 trillion landmark, an exponential 381% year-on-year growth. U.S. stock trading contributed about 56% of the total trading volume. In the third quarter, we launched Hong Kong securities lending and several derivatives trading offerings. including Hong Kong DOT Futures and MSCI Index Futures. The market share of our derivatives trading products climbed meaningfully over the quarter. Going forward, we will seek to further diversify our derivatives trading offerings.
spk03: FUTU continues to consolidate its leading position in the US Hong Kong stock market. In the past three weeks, we have acquired more than 10 billion Hong Kong dollars from six IPOs on our platform, including US stock IPOs Xiaopeng Car, Beike Taofang, The strong IPO market continued to play in our favor. In the third quarter, six IPOs recorded over 10 billion Hong Kong dollars subscription respectively on our platform.
spk08: including the U.S. IPOs of Xiaofeng Motors and Beike, and the Hong Kong IPOs of NongfuSpring and Mingyuan Cloud. To note, the Hong Kong IPOs of NongfuSpring attracted over 110,000 retail investors to subscribe over 35 billion Hong Kong dollars on our platform.
spk03: In terms of financial management, Futu has added 9 fund partners such as Morgan Stanley, We now provide products from more than 30 global top fund companies. By the end of this year, we will reach 8.1 billion Hong Kong dollars in revenue management and asset management. For PIA customers, the bond trading function will be officially launched in September. Currently, users can trade more than 30 Chinese dollar bonds on the platform, covering many industries such as technology, real estate, logistics, and finance. As for our wealth management business, MoneyPlus, we established partnerships with nine reputable asset managers, including Morgan Stanley, Invesco, and BNP Paribas. We have over 30 wealth management partners at the quarter end,
spk08: In the third quarter, wealth management daily average asset balance reached 8.15 billion Hong Kong dollars, a record high since we launched the service. Over 29,000 clients held mutual fund positions as of quarter end. In September, we launched bond trading for professional investors. We now offer a diverse array of USD-denominated bonds, covering multiple industries including technology, real estate, logistics, and finance. MoneyPlus is strategically positioned to offer more diversified products, catering to different risk appetites of our users and retaining more user assets within Food2's ecosystem.
spk03: Our corporate service brand, Food2 Anyi, has also achieved steady progress in this quarter. We have obtained the highest-level privacy information management system ISO 27701 certification. We have also become the first Chinese company to obtain this certification ESOP service providers. As of the end of the quarter, our ESOP customers reached 126. The IPO branch and IR service customers reached 81. FUTU Anye received the recognition of TMP, biological medicine, and consumer-related head companies. In the third quarter, Mingchuan Youping, Okang Weishi, and Jiumaojiu Group chose us as ESOP service providers.
spk08: Our enterprise service, Futu I&E, also made solid progress in the quarter. We obtained ISO 27701 certification for our ESOP SaaS system, the world's highest level of privacy information system certification. We are the first ESOP SaaS provider in China to receive such recognition. As of quarter end, we had 126 ESOP clients and 81 IPO and IR clients. Futu I&E continues to be the go-to ESOP partner for industry-leading TMT, biotech, and consumer retail companies, including Miniso, OccuMotion, and JioMaoJio Group.
spk03: Our internationalized business has also adopted two new milestones. On October 1, the Singapore Financial Management Bureau officially approved Futu Singapore's application for capital market service. Our plan will start Singapore's business in the first half of 2021. We have been reaching new milestones with internationalization. Food2 Singapore Private Limited was officially granted the Capital Market Services License
spk08: from the Monetary Authority of Singapore. We aim to launch the Singapore business in the first half of 2021, and we are excited about our growth prospects in the country. Besides, I am pleased to share that on November 13th, Futu Futures Inc.' 's application for National Futures Association member was approved. Futu Futures Inc. is now a Commodity Futures Trading Commission registered Futures Commission merchant. Next, I'd like to invite our CFO, Arthur, to discuss our financial performance.
spk09: Thanks, Liv and Daniel. We continue to deliver outstanding financial results. Let me walk you through some key of our financial details for the three quarter. All currencies are in Hong Kong dollar terms. We recorded total revenues of $946 million, up 2.7 times year-on-year and 38% Q&Q. To break it down, brokerage commission and handling charge income was $563 million, up 3.6 times year-on-year and 38% Q&Q. This was primarily due to the 3.8 times growth of our total trading volume. Our blended commission rate this quarter was 5.8 basis points down from 6.6 basis points in the last quarter. This sequential decrease was primarily due to the increase in trading volume per dollar for clients that used the flat rate pricing package option we offered. Brokerage income accounts for 60% of our total revenue in the quarter. Interest income was $276 million, an increase of 140% year-on-year and 33% QMQ. Both margin financing interest income and IPO financing interest income achieved a strong growth. Margin financing interest income increased primarily on the back of a significant 142% year-on-year increase in daily average margin financing balance. IPO financing interest income increased significantly due to the hit Hong Kong IPO market and our clients' increasing appetite to subscribe high-quality IPOs on margin. Interest income contributes about 29% of our total revenue. Other income was 107 million, up 5.6 million yuan a year and 52% QQ. The growth was primarily due to increase in our IPO subscription service charge income, current exchange service income, and underwriting fee income. Other income contribute about 11% of our total revenue. On the cost side, total cost was $182 million, up 161% a year and 18% Q&Q. To break it down, Brokerage commission and handling charge expenses were $101 million, an increase of 3.1 times a year and 31% Q&Q. The growth was roughly in line with our total trading volume growth. Interest expenses were $47 million, an increase of 151% a year and 18% Q&Q, primarily due to higher IPO financing interest expenses. Processing and servicing costs were $34 million, an increase of 27% year-on-year, primarily due to increase in crowd service fee to support the growing number of trades. As a result, total gross profit increased to $764 million, up 3.1 times year-on-year and 43% year-on-year. Gross margin was expanded to 81% versus 73% in the same period last year. Total operating expenses was $323 million, an increase of 111% year-on-year and 22% Q&Q. To break it down, R&D expenses was $150 million, an increase of 111% year-on-year and 28% Q&Q. The increase was primarily due to an increase in R&D headcount to support our business expansion. Selling and marketing expenses was $111 million, an increase of 184% year-on-year and 15% Q-on-Q. The increase was primarily due to higher branding and marketing spending. Although we are more aggressive on our marketing strategy to take advantage of the favorable market conditions, our client acquisition costs per each unit continue to trend down in this quarter. G&A expenses was $62 million, an increase of 45% year-on-year and 22% Q&Q. The increase was primarily due to an increase in headcount for G&A personnel. As a result, our net income increased to $402 million, non-GAAP adjusted net income increased to $408 million, up over 16 times year-on-year and 68% Q&Q. The significant bottom-line growth was primarily due to robust revenue growth and strong operating leverage. Also, in this quarter, we completed our $314 million equity follow-on financing. This placement has doubled our equity base and significantly strengthened our balance sheet to support our future growth. That concludes our prepared remarks. We'd now like to open the call to questions. Operator, please go ahead.
spk02: Certainly, sir. Ladies and gentlemen, we will now begin the question and answer session. If you wish to ask a question, please press star followed by the number 1 on your telephone keypad and kindly wait for your name to be announced. Once again, it is star followed by 1 to ask a question. If you wish to cancel your request, you can press the pound or hash key. We have the first question coming from the line of Ivy Liu from HSBC. Please go ahead.
spk04: Thank you. It's from HSBC. And I have two questions today, mainly on the financial numbers. So first one is in the balance sheet, the loans in advance. And also, we've seen a very big difference between this number and our margin balance. So could management explain the reason of this discrepancy? And the second number is on the short-term borrowings because we see a sharp increase on this number. So could management give us guidance on the source of that funding and also the funding cost trend going forward? Thank you.
spk09: Okay, thank you, Abby. I will answer your second question first. For the short-term borrowing, actually, since the beginning of this year, we started to further optimize our funding source. Besides the equity following and also the bank borrowing, we also started to use the repo, equity repo, to further lower down our financial cost and further to support our balance sheet growth. So, the items you can see from the short borrowing is more due to this equity repo instrument. And for the first question, I think basically these two things, the loan balance and also the margin balance is still quite in line. Actually, I see the number is not too far away, so just wonder could you further clarify your questions.
spk08: Hi, Libby. So maybe I'll chime in a little bit on your first question regarding the discrepancy. So I just want to clarify. So for our margin financing and securities lending balance, that number does not include our IPO financing balance. But for the line item loans and advances, that includes our IPO financing balances. So actually, in the third quarter, there are two IPOs that extended from September to October. If I remember correctly, , and were the two Hong Kong IPOs that started the IPO subscription process in September, but they eventually got lifted in October. So that's to about HK$25 billion of IPO financing. was included in our loans and advances balance on the balance sheet, whereas it's not included in the margin financing and securities lending balance. So I think that kind of explains the discrepancy here.
spk02: Thank you. We have the next question. This is coming from the line of Daphne Poon from Citi. Please go ahead.
spk05: Hi, good evening, management. Thanks for taking my questions. So my first question is regarding the IPO subscription business. Just wondering if you can help break down the contribution in this quarter, like to interest income, other revenue, and commissions. And related to that is that recently we saw the news from Hong Kong EXIS saying that they're planning to revise this IPO subscription route to basically shorten the subscription period from T plus 5 to T plus 1. So just wondering if the management has done any activity or estimate in terms of the revenue or earnings impact from this. And second, just want to quickly check on the new paying customer mix this quarter between the Hong Kong and China clients. And lastly, it's regarding your sales and marketing costs. So as you mentioned earlier, the unique customer acquisition costs per new paying client is done meaningfully. I think now it's less than 1,000 Hong Kong So just wondering if that will be the sustainable level going forward. Basically, what's the outlook here? Thank you.
spk09: Okay, thank you, Daphne. I will answer your first question about IPO margin, and I will partially answer your second question in terms of breakdown of new paying clients. I will leave the acquisition cost outlook to my colleagues, Robin. We noted this consultation paper issued by Hong Kong Stock Exchange earlier this week. You are right that the IPO processing timeline may be cut from the current T plus 5 days to T plus 1 days under this new arrangement. On a static perspective, our IPO margin revenue will be negatively impacted, similar to all our retail broker peers, and I expect we may lose middle single-digit revenues if we implement this new policy in the first three quarters of this year. On a forward-looking perspective, I think this loss may be significantly offset by the demand increase and also the industry consolidation within the retail brokerage business in Hong Kong. Despite our near-term financial loss, which I think is fully manageable, We strongly support this initiative advocated by the Hong Kong Stock Exchange as we think this reform will improve the overall market efficiency and eliminate unnecessary transition costs for all market participants. This will make the overall market more accessible to the main street, so we think every participant, including FUTU, will be better off eventually. And for your second question, in terms of the new paying clients we achieved in this quarter, 53% came from the Hong Kong local market and the remaining 47% came from the mainland. I will leave the client acquisition cost questions to Robin. Thank you.
spk07: Yes, I have a question for Robin. It's about the customer cost of each of our paid customers. What will be the trend of the customer cost after that?
spk00: Okay. With the increasing trend of our natural flow, we can see that the entire customer cost has been in decline since 2020. However, this customer cost is not our only consideration. We still hope to pay more attention to the entire ROI.
spk08: So this year, the percentage of our new paying clients from organic growth continue to climb meaningfully quarter after quarter. And you can see that our per paying client acquisition causes therefore come down quite a bit this year. But in terms of our overall market spending, I think we attach more importance to the ROI, our client acquisition, as opposed to the total marketing expenses.
spk02: Thank you. Shall we move to the next question? We have the next question coming from the line of Yiren Zhong from Credit Suisse. Please go ahead.
spk06: Thanks for taking my questions and congratulations on a strong quarter. I have three questions. One is in 3Q you have further gains trading volume market shares both in Hong Kong and U.S. How is the trend looking for 4Q thus far? And also more specifically on U.S. volume, We noticed that the China ADR's trading volume has significantly picked up in November. And could you share any color on kind of the stock distribution of your U.S. volume? What are the top traded U.S. stocks on your platform and how concentrated on the China ADR's traded through FUTU? Secondly, we calculated that the overall commission and handling fee rate was 5.5 bps in 3Q lower than the 6.4 bps in the last quarter. Could you share kind of the underlying drivers for the Q&Q change in any color on how it's trending going forward? And thirdly, on customer acquisition, are you able to break out the contribution from, say, IPO-related promotional events, just trying to understand, you know, how should we think about the customer acquisition growth related to IPOs and also how is that, how should we think about the trend going for beyond 4Q, beyond this year into next year and beyond? Thank you.
spk09: Okay, thank you. I will answer the first two questions and I will also leave the third question to Robin for your inquiries about client acquisitions. Number one, as we mentioned in our last We see significant spikes in terms of our market share gains in Hong Kong since July. And the situation in Q3, you can see the overall our Hong Kong trading volumes increased a lot. In terms of the market shares, we continue to keep our market shares over 2%. And I think the situation in October is still well on track. So I do expect there can be some structural positive things going forward. And in terms of the U.S. trading volume, actually I think the breakdown for our U.S. trading is not very concentrated on these Chinese ADR names. If my memory is right, our Chinese ADR trading volume accounts for roughly 10-15% of our total U.S. trading volumes overall. So despite we will benefit from these Chinese ADR trading volumes recently in the U.S., I think the overall impact is not very meaningful. And secondly, about your question on the commission rate, actually I addressed this in the opening remarks. On a life-for-life basis, actually our commission rate keeps very stable. You can see our blended commission rate dropped down this quarter compared with last quarter. This is mainly due to the increase in trading volume per dollar for clients who use the flat rate pricing package options we offered. I will leave the third question to Robin.
spk08: Okay, I'll take the third question on our paying client breakdown. It's very difficult for us to break out what clients specifically come for the IPOs because it's really hard to trace their activities like they may invest in stocks first and then subscribe to IPOs. So it's very hard to do that breakdown, but overall we have seen that When these jumbo IPOs get listed in Hong Kong, we'll see a pickup in our client acquisition for one to two weeks beforehand. For Ant Group's IPO, for example, two weeks before the Ant Group's IPO, we have seen a meaningful pickup in our paying client numbers. And as we mentioned, these jumbo deals in Hong Kong will definitely be a positive contributor to our paying client growth. But again, it's very hard to break down the specific percentage. But we think the Hong Kong IPO in general just attracts a lot more attention to the market. It may bring some clients that are interested in the IPO at first, but then they will be converted to other trading clients. So overall, we have not seen a meaningful change in our clients' asset balance or their trading behaviors.
spk02: Thank you. Once again, ladies and gentlemen, it is followed by one to ask a question. And we have the next question from the line of from . your line is open, please.
spk01: Thank you for taking my questions. Two questions for me. First, you have delivered a very strong brokerage business this year with decent market share gain. So at this point, what is your long-term strategic vision for your business model? How do you prioritize your transitional business versus wealth management fund product distribution over the long term? And secondly, can we have an update on the U.S. settlement system? Any disruption due to COVID-19? Just in terms of timing, when should we expect the migration of the trading accounts to take place? And when will the financial impact come through in terms of potentially higher interest income from settlement cash? Thank you.
spk09: Okay, thank you Kevin. Let me answer your second question first. I will leave the first question to my colleagues Liv and Robin. You are right, our progress in the US self-clearing was negatively impacted by this COVID-19 pandemic. Now we currently expect we will start the trial migration to our self-clearing house in the first half next year. It is still too early to expect the financial impact. I think overall speaking, next year's financial impact will still not be too significant. But just to give you a rough idea based on our current US stock positions, if we complete this full process of the self-clearings, I think we will at least generate additional 50 million U.S. operating profit.
spk00: Hello. Our company's strategy is mainly a few pieces. The first one I think is a basic plan for the company, which is our entire retail economy business. The second one is our retail wealth management business. In fact, this is mainly able to increase the stability and certainty of our income. Then the third one is our corporate service, which is IPO distribution plus ESOP and IR service. This is with our entire retail business is able to form a better conscience complement. It is also an important component of our entire investment ecosystem. Then the fourth one is our internationalized business. Our internationalized goal is actually to expand our target audience, optimize our customer structure, so that our customer ratio can be more reasonable. Then the fifth one is uh, uh, uh, uh, uh, Thank you.
spk08: Our strategy is composed of five different elements to our businesses. And number one is our retail brokerage business. Number two, a long-term business that provides a lot more visibility by nature. And thirdly is our enterprise service, Futu I&E, with our e-flop system and ITO distribution services. And number four is our international expansion. We want to expand our client size. And we think that overseas market will contribute to a meaningful share of our overall paying client base in the mid to long run. And number five is that we want to create a future into an ecosystem that is centered around users and provides connectivity to different stakeholders like the investors, KOLs, media, etc. And we want to construct a self-reinforcing ecosystem. And with regards to the relationship between our brokerage and the wealth management business, I think our strategy is to become a one-stop financial services platform for our clients and catering to those various different allocation needs for our clients. And I think wealth management is a very important step towards the strategy.
spk02: Thank you. We have our next question. This is coming from the line of Han Yang Wong from 86 Research. Please go ahead.
spk10: Good evening, Benjamin. Thank you for taking my questions. So my first question is about our margin financing business. So our successful offering last quarter helped us serve more margin financing demand and significantly improve the margin financing balance. Will the impressive growth be sustainable given we have the leverage restriction on the business in Hong Kong? And how shall we project in the future growth of our margin financing balance? And do we need to keep raising money from the capital market to meet the leverage requirement? And my second question is on our user acquisition strategy. So in the third quarter, I think a number of Hong Kong paying users have surpassed the many users. So what will be our strategy in the future to acquire the many China users which seems to have a larger user base that we could explore into? My final question is about the IPO suspension. So will there be any impact on our IPO financing business in the fourth quarter? Thank you.
spk09: Okay, thank you. I think I have already answered your third question before through another analyst. I will answer your first question about the margin financing and I will leave the user acquisition strategies to my colleagues Robin and Daniel. For the margin financing, you are right. After the equity placement we did in third quarter, our equity base has already almost doubled. This will be very supportive for our balance sheet business going forward. I think based on our current business expansion, we will have sufficient money to support our margin financing in the next 12 to 18 months. If you look at our third quarter number, our total equity base now is already exceed HK$5 billion. Based on the regulations made by Hong Kong SFC, each retail broker's leverage ratios in Hong Kong cannot exceed five times. So you can have just here, just to give you some rough ideas about our, you know, the further upside for our margin businesses. I think it is very difficult to estimate the margin balance out of going forward as that, you know, there was a lot of market conditions, market volatilities will impact the client's risk appetite. But I think long-term speaking, as we have more and more clients, this balance will continue to grow down the road. Now I will leave the second question to Robin. Thank you.
spk00: Hello, I would like to answer a question from a customer in mainland China and Hong Kong. If you are a customer in Hong Kong, you can see that we have made a lot of brand advertisements in Hong Kong. Because Hong Kong has an advantage in terms of land use. The whole population is concentrated and the penetration rate of the entire investor is high. The natural acceptance of Hong Kong and U.S. stocks will also be more mature. So what we are taking in Hong Kong is a more aggressive strategy. However, in mainland China, we are more focused on the introduction of our customers, as well as the staff's e-shop activities. Therefore, there is still a certain difference between the two sides. In addition, in Hong Kong, the opening and closing of the entire customer base will be more convenient. So, overall, the growth of Q3 in Hong Kong will be better than that of mainland China. Thank you.
spk08: We have been quite aggressive with our Hong Kong marketing strategy and that turned out to be quite effective because Hong Kong itself is a small place and the existing client base, they are very prone to trading Hong Kong and US securities. already so our marketing efforts have been quite effective so far. And with regards to our mainland client acquisition, I think we use different client acquisition strategies because of the number of constraints. For example, like ESOP continues to contribute a very steady stream of high quality clients and the word of mouth referral is more meaningful in mainland than Hong Kong in terms of of our absolute paying client contribution. So we have different client acquisition strategies for Midland and we think the growth prospects in Midland are very strong. Thank you.
spk10: Thank you. Very helpful.
spk02: Thank you. We have our next question which is coming from the line of Cecilia from DTC Investment. Please go ahead.
spk06: Hi, management. Thank you for taking my question and really congrats on the strong quarter. And I'm really excited about FUTU launching Hong Kong option products and other derivatives instruments. So I have to expand your product portfolio. But my concerns are on the risk control side. I don't know if you have anything to share at this moment about risk management regarding your burgeoning derivatives business segment. Thank you.
spk09: Okay, thank you. I will let my colleagues, Daniel, to answer this question. Thank you.
spk08: With regards to our risk management procedures, we have always been quite prudent. with our risk management approach. And actually, if you compare our LTV ratio, I mean for individual stock margin financing, if you compare our LTV ratio to those offered by traditional banks, we are more conservative around that. And that also goes with our derivatives trading risk management as well. I think to prepare for the launching of this business, we have actually recruited a number of finance personnel from the traditional institutions that have very rich experience in risk management for derivatives products. So overall, we have been prudent in our approach, and we gradually roll out our derivatives trading products. Like we mentioned, in the third quarter we started offering the Hong Kong securities lending business. But so far, we've only opened up that service to 10% of our total paying client base, and we decided to open it to 100% of our client base by the end of this year. So when we start the new derivatives product, we are prudent, and we take a gradual approach towards our business development. So overall, I think so far, we have not... Since we launched the margin financing business in 2017 and we have added a lot of new derivatives products, but so far we have not experienced any material loss on any of our margin financing or derivatives trading offerings. Thank you.
spk06: Understood. And may I add one more question on your brokerage fee and commission expense ratio? Is there a meaningful difference between the brokerage expense ratio of your U.S. trading volume and that of Hong Kong volume? And how should we set the expense ratio to be in, say, three to five years when your proprietary U.S. stock clearing system is fully developed? Thanks.
spk09: I think in terms of the blender commission rate in Hong Kong and in the U.S., U.S. rate is slightly higher than Hong Kong, but the difference is not too significant. And secondly, for the U.S. self-clearing capabilities, Kevin from UBS also raised this question before, I think it will take a very long time for us to gradually migrate our clients' US stock positions to our self-clearing house. It has a lot of unit technology know-how and we need to make sure all these corporate actions can be conducted in a right manner. So it definitely will take time. But just to give you a rough idea, if we migrate all these existing positions to our self-clearing house today. The cost savings in terms of the execution fee and also the idle cash potentially we can monetize. Alongside with the stock positions, we can potentially monetize through stock borrowing and lending activities. We can generate additional 50 million US. operating profit without considering any direct people cost nowadays.
spk06: Got it, got it. That's really helpful. Thank you.
spk09: Thank you.
spk02: Thank you. Once again, ladies and gentlemen, just to remind you, it is star followed by the number one to ask a question. Once again, it is star one to ask a question. We do not have any questions at this moment. I would like to hand the conference back to our host. Stanil, please take over for any closing remarks.
spk08: Thank you. That concludes our call today. On behalf of the Futu management team, I would like to thank you for joining us today. If you have any further questions, please do not hesitate to contact me or any of our investor relations representatives. Thank you and goodbye.
spk02: Thank you, sir. Ladies and gentlemen, that concludes our conference for today. Thank you all for your participation.
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