Online share dealing overtakes traditional methods

Online share dealing overtakes traditional methods

Internet share dealing has now overtaken traditional trading methods such as telephone or face-to-face trading with over half of consumers now placing trades online.

Research from Datamonitor shows that while in 2001 only 28% of the investing public placed their execution-only deals via the Internet, this figure almost doubled by 2005 to reach 54%.

Ingo Nachbaur, financial services analyst at Datamonitor, says the advantages of online stockbroking are obvious and anyone with access to the Internet can benefit from the service: "There is no more waiting in telephone queues, immediate access to one's portfolio is given and trades can be executed at the click of a button."

Most importantly, online stockbroking is cheaper than traditional trading methods such as telephone share dealing, says Datamonitor. A £1000 trade over the telephone costs on average 40% more than the same trade over the Internet, while a £2500 trade costs 80% more.

Only few stockbrokers charge the same flat fee for Internet and telephone trades and only HSBC's subsidiary first direct, Jarvis' Sharedeal Active and Boursorama's selftrade charge the same flat fee for either method.

The report also notes the growing popularity of spread-betting and contracts for differences as an alternative to equity investments. It is believed that CFDs already account for about 20% of the London Stock Exchange trading volume while the number of spread betters in the UK is estimated to be around 100,000, a figure growing by about 25% a year.

However, Datamonior forecasts that forthcoming rule changes, dictated by the EU Markets in Financial Instruments Directive (MiFID), are likely to lead to increased administration costs and stagnation in market growth from Autumn 2007 onwards.

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