A recent report from financial body the Association of Private
Client Investment Managers and Stockbrokers (APCIMS) says online
broking now accounts for 22% of total "execution-only" trades (that
is trades via a broker without any sort of advice or management
services)
To put this into perspective, in 1999 a total of 20.4 million
trades were made for "private clients", that is people acting alone
rather than as part of a trust fund.
The report goes on to say: "The growth in online trading looks
certain to continue, as the number of online accounts is still
growing, new firms are continuing to enter the marketplace and
public interest remains high."
Deborah Fowler, a spokeswoman for the industry watchdog the
Financial Services Authority, says online trading in the UK peaked
at the beginning of this year when interest in online trading was
fuelled by the goldrush to snap up high-tech company shares.
Following the crash in technology stock prices and the
rationalisation that ensued, the growth in online trading has
become far steadier.
Despite the increased popularity of online trading in the UK, it
would be an exaggeration to say it has reached mass appeal. This is
reflected in the amounts traded online. Andy Thompson, operations
manager at the APCIMS, says research shows the average trade online
made by UK traders is £5,700. "But," he says, "as the volume of
trades grow, the average values of trades have been falling."
In fact, a survey of APCIMS members and the London Stock
Exchange projects that online trades in the third quarter of 2000
have come in at an average of £3,000.
E-trading in Europe
Another report, Asset Gathering in Europe by investment bank JP
Morgan, finds that while many analysts consider that established
banks should win the battle for online brokerage, this is not the
case. With the exception of Sweden, most of the leading players are
either specialists or the offspring of specialist firms.
The report goes on to say that the rise in e-trading is
symptomatic of the emergence of an "equity" culture, which is being
formed by the movement of three "Tectonic plates".
- Changing consumer behaviour: rising levels of wealth, the
strong performance of equities and increased consumer
sophistication are encouraging more risk taking. In particular, the
shift of responsibility for pensions from the state to individuals
is driving demand for higher-yielding equity-based products. The
affluent and "mass affluent" are the sweet spots of this change and
represent about 75% of total investable assets.
- E-finance: technology is revolutionising the manufacturing,
administration and distribution of investment products. For
instance, from January to October 2000 the number of online
discounts brokerage accounts in Europe has more than doubled from
1.4 million to over 3.1 million. E-finance has enabled the creation
of new business models while demanding a transformation of existing
organisations; the pace of change is proving to be destabilising
for many.
- Regulatory change: privatisations, a change in the tax status
of many investments products and macro-economics shifts such as
declining interest rates are driving an increased interest in
equity-based savings. Deregulation is enabling the creation of a
pan-European market, which is propelling a wave of mergers and
acquisitions and start-ups, while it is also making financial
services product and marketing driven.