Deregulation in Hong Kong's brokerage market is breathing new life into application service provider (ASP) i21, which sees increased demand for its subscription-based online securities trading system as broker competition heats up.

The company has teamed up with e-finance firm Intelligent Group Enterprises (IGE) to package its Powerticker.com financial information service as part of proprietary online trading platform iStock21.

Rickie Fung, i21 chief executive, said: 'We certainly expect strong demand for iStock21 over the next 12 to 18 months. As an ASP, we're ready to perform most of the heavy lifting for traditional brokerage enterprises in Hong Kong. We see these companies focusing more of their resources on sales and marketing, leaving their online back-office functions to us.'

Deregulation of the local market's minimum brokerage commission rates for stock and futures transactions this April, and the reduction in stamp duty that took effect last September, were expected to lower trading costs and force players to consolidate.

IGE chief executive Eugene Ka said: 'To become more competitive and survive on lower margins, traditional brokerage firms and even the securities trading arms of banks will need to push forward their online trading initiatives.'

International Data Corp (IDC) projected 40 per cent of Hong Kong's securities trading volume would be online by next year. Of Hong Kong's 500 licensed brokers, fewer than 100 offer an online trading service.

According to the stock exchange, since the introduction of the Third-Generation Order Matching and Execution System (AMS/3) in October - which enables real-time settlement - online trading has grown steadily, accounting for a high percentage of monthly turnover from brokers offering Internet trading services.

Mr Fung said growing demand for ASP services in the financial sector should help revitalise the ASP market, which had seen plenty of negative publicity after the dotcom crash.

IDC defines ASP services as consisting of subscription-based managed or extended services around enterprise resource management, industry-specific, customer relationship management and e-commerce applications.

Mr Fung said the economic conditions should drive more enterprises to consider ASP services, which offer information-technology infrastructure and manpower to companies that need to focus on their core business.

Enterprise ASP spending is on its way to becoming a multi-billion-dollar global market. IDC said ASP customers spent US$693.5 million on these services in 2000. By 2005, ASP subscribers were expected to spend more than US$13 billion annually.

Mr Fung said the iStock21 online securities trading application was expected to help small brokers compete with the large firms. The system was based on software developer Excel Technology's InterTrade program. Large users included Yamaichi Securities and East Asia Securities.

The i21 service, however, faces stiff competition from online trading giant E*Trade. The United States-based company has also announced plans to offer under an ASP model its online back-office facilities to other brokers in Hong Kong.

Mr Fung said: 'With support from Powerticker.com, iStock21 provides a more consistent and effective interface between customers, brokers and banks with its real-time stock-monitoring, buy/sell order-processing, account-checking and settlement facilities. It also supports the AMS/3 system.'

Mr Ka said co-operation between i21 and IGE's Powerticker.com would soon extend to overseas Chinese investors who wanted to buy and trade locally listed shares. The companies would cross-sell ASP services to each other's customers. In Hong Kong, both offer their ASP services to the securities arm of Wing Lung Bank.

Established in March 2000, i21 is a joint venture between Excel Technology and iBusiness - a regional Internet company backed by Cheung Kong (Holdings), HSBC, Hutchison Whampoa and Hang Seng Bank. The venture has become the leading ASP in Hong Kong with a client base of more than 1,600 enterprises.

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