ONE OF the politer words I heard used to describe Freeserve's valuation as its shares soared on day one of trading was "dangerous", but at least we now have what Americans would see as a real internet business in the London market - real internet business as in massive valuation, volatile share price, minuscule revenue and non-existent profits.

So does the advent of such shares in the UK market mean that America's day-trading phenomenon will also follow?

There are structural differences between the UK and US stock markets that militate against day trading taking off here. The biggest difference is the 0.5 per cent stamp duty on all share purchases which has no US equivalent. This acts as a major drag on volatile trading activity. Quite simply, as a buyer of shares, you need to see a higher price rise in the UK to cover the cost of your purchase.

By coincidence, just a few days after Freeserve shares started trading, one of the leading internet brokerages in the USA unveiled E*trade UK, the first internet-only stockbroker operating in the UK. Its US website was launched in 1996 and now has more than 1.2 million active accounts and $26bn of customer assets held. E*trade UK subsumes ESI, which had been the first website outside the USA to offer real-time share prices.

E*trade's pricing structure

is highly competitive, operating on a flat-fee basis of pounds 14.95 for any trade of pounds 1,500 or less. Thereafter there is a maximum price of pounds 24.95 per trade which is reduced in steps back to pounds 14.95 the more you trade. The only other charge is a pounds 12.50 quarterly account-handling fee. These prices bring online dealing costs into direct competition with all but the very cheapest execution-only telephone services, while offering much more by way of investor support.

E*trade UK offers the ability to trade in all UK-listed securities; a dealing account also gives you a substantial research database, together with real-time news and prices. Once your deal is accepted and executed, you get an instant electronic confirmation and, if you are selling shares, you have the option of reinvesting the earnings from the trade immediately.

Conscious that E*trade in the US has been cited as part of the day-trading phenomenon, its UK operation is keen to present a responsible image. Julian Costley, its chief executive, says: "We've made a point of only allowing investors to purchase shares against cash held or to sell shares they actually hold. We are not offering margin trading." Indeed, to open an account with E*trade you will be asked to deposit a minimum of pounds 1,000 with the company.

One minor niggle - why should UK investors using E*trade UK pay pounds 14.95 when US investors using E*trade to buy shares on Wall Street pay only $14.95?


Robin can be reached at