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Thursday, October 15, 1998 Published at 12:13 GMT 13:13 UK

Business: Your Money

Share dealing: an Online revolution

Share trading in the UK is about to undergo a revolution.

Next week Barclays Stockbrokers, the UK's largest share broker, plans to make the first ever "real time" share trade in the United Kingdom over the Internet.

[ image: City brokers may soon be using the Internet rather than the phone]
City brokers may soon be using the Internet rather than the phone
Investors will be able to buy and sell shares at the very latest market prices at the click of a button.

Aspiring City wheeler dealers will be able to access trading screens from the comfort of their own homes.

And with competitors already queuing up to follow Barclays' lead, the onset of Internet share trading promises to slash the costs.

Big business

Internet share trading is already big business in the US.

More than 4m investors use Internet brokers and one in four trades, or more than 200,000 trades a day, are performed Online

Now the same pattern looks set to emerge in the UK.

Barclays is piloting its new service with clients over the next few weeks and it is due to be officially launched in November.

Philip Bungey, research and development director at Barclays Stockbrokers told BBC News Online: "It is what the clients say they want. It is the key to the stock market in the future. The dramatic expansion in the US will happen over here."

"In the US Internet customers tend to trade much more often. It is easier to use and customers like the privacy it gives them," he added.

[ image: The Internet holds the furture for share trading]
The Internet holds the furture for share trading
Charles Schwab, the biggest Online broker in the US with almost 2m customers, already offers an Internet service in the UK, but customers still have to use an intermediary to buy or sell shares.

Now it plans to launch its own instantaneous share dealing service to rival Barclays by the end of the year.

Competition hots up

E*Trade, another giant in the US Online broking field, has announced a joint venture with Electronic Share Information (ESI), the UK based company which provides stock market news and views.

It plans to set up a "real time" trading service during the first quarter of next year.

Stocktrade, run by Brewin Dolphin, one of the UK's largest private client stockbrokers, has also written to its clients outlining plans to update its existing Internet service.

And other big players in the US Online broking field are eyeing up the UK market.

Big prize

The prize is certainly worth fighting for.

E*Trade forecasts that the number of Internet subscribers in the UK will grow by up to 60% a year and that by 2000, 3.6m people will be Online.

With a third of people currently on the Internet owning shares, that means there could be more than 1m UK Online investors by the new millennium.

E*Trade estimates that around 150,000 people will be trading via Internet brokers by 2000, generating income of 50m a year.

And that number is due to grow dramatically, rising to 200,000 by 2001.

Cutting costs

Not only is Internet dealing much easier and quicker, it should prove to be much cheaper.

Barclays will initially charge the same as for its phone share dealing service - a commission of up to 1.5%, subject to a minimum charge of 17.50.

But Mr Bungey admits that the service could become cheaper as competitors enter the market.

Existing Internet trading services, such as Stocktrade or Xest, run by London based broker Charles Stanley, typically charge a flat rate for share deals which offers the chance to make big savings.

[ image: Internet investing should help cut broking fees]
Internet investing should help cut broking fees
For example, somebody buying 5,000 worth of shares can typically save more than 50 in fees using the Internet.

And new Online share trading services are likely to offer similarly competitive rates.

If America is anything to go by, the cost of share dealing could tumble.

Price war

The number of Online brokers competing for the Internet investors' dollar has exploded in recent months, with more than 90 now in existence.

And that has caused a price war in the US market.

The average cost of dealing has fallen to $18.95 (11), and in some cases the cost has dropped to as little as $5.

Internet trading has allowed brokers to save on administration costs, which can be passed on to clients.

But the effect on the broking industry will be profound.

Online trading is likely to lead to job losses and put some companies out of business as they struggle to hold onto customers.

All change

The onset of Online share trading will also have dramatic consequences for European stock markets.

It is likely to bring forward the creation of a single European stock market, with brokers eventually offering instant access to shares across the continent.

The number of shareholders in the UK is also likely to expand rapidly as Internet trading becomes more popular and investors have more access to Online financial information.

The future

With world markets in turmoil, it may appear to be a strange time for companies to pour money into Online broking.

Indeed some of turbulence in the US market of late has been put down to Online investing.

Instant Internet trading has allowed traders to sell up quickly, adding to the market's volatility.

But brokers are looking beyond the current market malaise.

The future of share trading lies on the Internet.

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