Share trading websites have moved to fill the gap left by the London Stock Exchange following th...
Share trading websites have moved to fill the gap left by the London Stock Exchange following the collapse of its merger talks with Frankfurt's Deutsche Bšrse last year.
The speed with which e-finance organisations, such as online exchange Jiway and alternative exchanges such as Tradepoint, have filled the void for private investors is as impressive as the rate at which online brokers are warming to their presence.
The Association of Private Client Investment Managers and Stockbrokers (APCIMS), which represents more than 90% of Britain's online and full service stockbrokers, cautioned the LSE in December that it is not keeping up with the market.
A spokesperson for the organisation said: "There is an implicit assumption among UK policy makers and many market users that London is still the best place to do business best in terms of cost, best in terms of spreads, best in terms of regulatory touch. This may be a delusion. In particular, spreads on the LSE's automated SETS trading system are significantly wider than on major Continental markets, and on some principal US ones, too."
Jiway has already launched trading in UK shares for retail share investors and Michelle Townsend, Jiway's head of marketing and corporate communications, says it can offer seamless trading in German shares, a situation that would have eventuated had London Stock Exchange shareholders approved the LSE-Deutsche Bšrse merger.
British stockbrokers who have plans to use the alternative exchange include myBroker, Sharepeople, SelfTrade, Stock-Academy and InvestinSecurities. Jiway will also offer Italian and Dutch shares, as well as French and Swedish equities.
Arun Kumar, Jiway's head of market development, said the proliferation of exchanges and alternative trading networks is preceding industry consolidation, leaving "only those who can provide the fastest, most efficient service retail investors want."
Julian Martin-Redman, Stock-Academy's chief executive, said: "It is not necessarily that Jiway is cheaper but rather that you can get everything in the one place and you do not have to go around to every European exchange and register separately."
Clare Nickson Havens from UBS Warburg's New York office said a similar market fragmentation is occurring in the US.
She added: "Institutional investors, as well as retail investors, will conduct an increasing amount of their transactions electronically. Difficult, illiquid or large size trades could go through more traditional routes."
America's order-driven alternative trading platforms, called electronic communication networks (ECNs), have risen from one in 1969 to nine today and UBS Warburg estimates ECNs have a 30% market share of Nasdaq trades.
Kumar said Europe's growing equity culture, from a low position where private equity savings by Europeans lags behind that in America, could change this. Kumar said the position of traditional exchanges had been overtaken by a global view of equities by sector rather than country of origin, and exchanges such as Jiway offering cross-border trading were better placed to reflect consumers' new perspectives.
Jiway's electronic systems, which offer settlement and custody as well as trade execution, can complete a trade in German stocks up to E50,000 for a cost of E7, compared to between E40-50 for going through a traditional broker and exchange, Kumar said.
James Bateman, marketing manager at www.mybroker.co.uk, said private investors "probably could not care less" at which exchange stockbrokers execute and settle trades.
While the benefits for investors whose brokers use alternative trading platforms may only appear in lower commission, some are bypassing exchanges completely and aiming to trade shares between their own clients.
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