Due to coincide with its planned listing in July and reflecting its desire to move towards a fully electronic register in its shares, the LSE says it will waive the annual service fee for investors holding shares in the company. As part of a wider promotion of electronic shareholding, the Exchange intends to make the service available to private investors in the shares of other companies.

The new service is designed to appeal principally to retail investors who currently hold paper certificates, which can be both slow and costly to process. The LSE says it will act as an independent sponsor for private investors to be Personal Members of Crest, the UK's electronic settlement system. Investors using the service will be free to deal with a choice of brokers whilst retaining the full rights and benefits of legal ownership of their shares.

Richard Hunter, head of dealing services at NatWest Stockbrokers says: "This is a very interesting spin on the current Crest Personal Members service. If ever there was a time for retail investors to take the plunge and benefit from dematerialisation...then surely this is it."

The LSE says it will additionally provide an Internet facility, allowing investors to check their shareholdings and to submit instructions on moving stock. More details of the scheme will be released at launch in July.

Clara Furse, chief executive of the London Stock Exchange comments: "The London Stock Exchange is committed to removing barriers to growth in capital markets - certificated trading is clearly inefficient. We would like to see the whole market move to electronic shareholding."

The initiative was welcomed by Angela Knight, chief executive of the Association of Private Client Investment Managers and Stockbrokers: "We believe that embracing the electronic world will bring efficiencies to trading and settlement and so benefit all investors."