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The Independent Online

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

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

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

There are structural differences between the UK and US stock markets that militate against daytrading taking off here. The biggest difference is the 0.5 per cent stamp duty on all share purchaseswhich has no US equivalent. This acts as a major drag on volatile trading activity. Quite simply, as abuyer 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 internetbrokerages in the USA unveiled E*trade UK, the first internet-only stockbroker operating in theUK. 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 websiteoutside the USA to offer real-time share prices.

E*trade's pricing structure is highly competitive, operating on a flat-fee basis of £14.95 for any trade of £1,500 or less. Thereafter there is a maximum price of £24.95 per trade which is reduced in stepsback to £14.95 the more you trade. The only other charge is a £12.50 quarterlyaccount-handling fee. These prices bring online dealing costs into direct competition with all but thevery cheapest execution-only telephone services, while offering much more by way of investorsupport.

E*trade UK offers the ability to trade in all UK-listed securities; a dealing account also gives you asubstantial research database, together with real-time news and prices. Once your deal is acceptedand executed, you get an instant electronic confirmation and, if you are selling shares, you have theoption 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 UKoperation is keen to present a responsible image. Julian Costley, its chief executive, says: "We'vemade a point of only allowing investors to purchase shares against cash held or to sell shares theyactually hold. We are not offering margin trading." Indeed, to open an account with E*trade youwill be asked to deposit a minimum of £1,000 with the company.

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

E*trade: www.etrade.co.uk

Robin can be reached at RobinAmlot@aol.com

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