Online trading set to grow in Europe
Share.com gets ready, as Schwab, Barclays press on
By Suzanne Miller, CBS MarketWatch
Last Update: 11:23 AM ET Jul 9, 1999
Also: NewsWatch
LONDON (CBS.MW) -- Over the next few months, private investors in
Europe may see their choice of online stock-trading options multiply.
That won't, of course, be hard to do, considering
that there's just a handful of banks offering any
serious online trading for the European private
investor at the moment.
Those that have the greatest visibility in the United
Kingdom are Charles Schwab Europe, a division of
San Francisco-based Charles Schwab (SCH:
news, msgs); London-based Barclays
Stockbrokers (BCS: news, msgs), online at
Barclays-stockbrokers.co.uk; and Stocktrade, the
execution-only brokerage division of the investment
bank Brewin Dolphin Securities Ltd., which
launched Stocktrade.com last Nov. 30.
Over the next few months, a group known as
Share.com may be the next serious contender on
the U.K. scene. The group, which is in talks for
funding with investors, may be ready to launch in
months. "We are very much a start-up business and
haven't made any announcement about what or
when we'll launch," Neil Stapley, chief executive of
the group, told CBS.MarketWatch.com. "But
we'll be doing (something) in the not-to-distant future."
Although Share.com will be starting as an independent group without the benefit of a big parent like Barclays or Schwab, it will be able to draw upon the market savvy of in-house executives such as Stapley, who was the head of the retail brokerage business at NatWest from 1987 through 1993 and managing director of Charles Schwab Ltd. from 1994 through 1995.
He was one of the original Schwab executives, given the mandate of starting Schwab's operations in Europe, and is all too familiar with the painstaking process of getting this kind of operation up and running in Europe. (The chart above compares the stock performance of Schwab and U.S.-listed shares of Barclays with the broader broker-dealer sector over the past six months.)
Getting ready for takeoff
"There's been doubt about whether or not online trading will take off in the U.K. in the same way it has in the U.S.," Stapley said. "I subscribe to the view it will take off in a big way."
Market observers say there are also a few other big U.S. banks nosing
around in the U.K. market with a view to launching online banking
services in the months ahead. But most of them remain nervous about
taking the leap before determining just how deep the market is.
This kind of hesitance may be the big chance for start-ups such as
Share.com, or others such as Euritrade (Euritrade.com), an online
share-trading company in the making backed so far by one man, Justin
Hunter.
Hunter recently arrived in the U.K. after working for two years with
Boom.com, a Hong Kong-based online stock-trading service for private
investors.
Comdirect eyes U.S. market
In Germany, meanwhile, the two big players there are ConSors and
Commerzbank's Comdirect.de. ConSors, which went public on
Germany's Neuer Markt in May (see story), controls more than 25
percent of the online brokerage accounts in Germany.
At Comdirect, meanwhile, business has apparently
been booming. Reiner Schuering, head of press
relations, said last year the group had 1.7 million
orders and that some 40 percent of its share
orders were executed online. This year, 60 percent
of its business is being done over the Internet.
"In Germany, there's a new culture of investment.
The private customers realize that (pure) savings
aren't as attractive as shares," he said. This year,
he said, his group has been making a big
advertising push for its online trading service.
Indeed, the company has been doing so well it's
planning a U.S. listing in the coming months.
In the United Kingdom, where a deeper equity culture has been in place far longer than on the Continent, progress has been surprisingly slow -- not least because there have been some big miscalculations about what it takes to get a back office started.
In the United States, it's a relative piece of cake because the back office for share dealing is automated at virtually all brokerage houses. In Britain, however, the system is still heavily paper-based because share owners must be in physical possession of what's known as a share certificate -- a piece of paper proving ownership. That means a mountain of extra work in logging and processing these pieces of paper, an aspect of the U.K. equity culture that British bankers say Schwab and the like underestimated.
Beating the stock exchange
Schwab, undaunted, is still forging ahead in Europe. Its latest move came this week, when it announced on Wednesday that it's going to offer Swiss investors the chance to trade shares online in the main U.K. and U.S. markets. In June, it said it was launching U.K. share "shop networks," which would increase its number of British branches fourfold.
Barclays, meanwhile, has been moving to make its own U.K. service
more attractive by offering online investors a greater range of price
quotes. Tom Sheridan, who heads Barclays Stockbrokers' online trading
service, said the service is gradually increasing the number of market makers that supply Barclays' private investors with price quotes from four to a total of 12.
That means investors can get the best price from a
bigger pool of players and then execute an order
within 15 seconds of making a decision.
"Electronically we poll other market makers for the
best price. We're beating the London Stock
Exchange 47 percent of the time," he said.
In the months ahead, price will become a key
component of competition, as European investors
wake to the potential riches of equity investing.
In Germany, for instance, investors opting for
online trading with brokers such as Consors pay
about half the price charged by traditional brokers.
Some say online trading has also been held back in the U.K. because
regulators have been nervous about the prospect of green investors
rushing blindly into get-rich-quick gimmicks. That's one of the reasons
Barclays and others have moved cautiously.
But for those who hope to make themselves known in a market that could well be on the brink of a boom, caution could ultimately be the quickest road to oblivion, as competitors start to crowd Europe's highways. In a Net world that attracts customers because of speed and easy access, those with agility and grit will be the big winners. |
