The good, the bad and the merger

What will the London Stock Exchange merger mean for private investors?

The merger between the London Stock Exchange and the Deutsche Borse in Frankfurt to create the IX market was announced this week. What does it mean for the private investor? Jeremy King, head of personal investment at Pro-Share, provides some answers.

Q: If I own shares, do I have to take any immediate action? Should I talk to my stockbroker?

A: Private investors do not have to take any action at the moment. You can still use the same stockbroker.

Q: Will share prices now be quoted in euros?

A: Initially, the newly merg-ed market will quote share prices in both sterling and euros. The aim is eventually to quote only in euros, but this will take years to happen.

Q: Will dealing costs be more or less expensive?

A: There is good and bad news. The good news is that the merger ought to bring cost savings over time, although these are difficult to estimate at the moment. Using just one system instead of two should enable the merged exchange to cut costs. More immediately, the costs of a UK investor dealing in German shares should be cut by about two thirds.

The bad news is that when the system changes to all euros, smaller investors may face foreign exchange costs if they choose to keep their holdings in sterling. They may also face a currency risk if they sell them, if the pound moves against the euro. The merger parties say these costs are likely to be small.

Q: Does the merger mean I can buy German shares as well as UK ones?

A: Yes. One of the main advantages of the merger is that you will be able to buy and sell a far wider selection of shares. You will be able to buy and sell German shares as easily and cheaply as UK ones.

Q: Will the merger improve liquidity?

A: Yes. Since more than one Exchange will now be involved, there will be more people trading, and the spread between buying and selling prices should reduce. The exchanges in London and Frankfurt are in further merger talks with those in Milan and Madrid, which would increase liquidity even further. The special exchanges for technology stocks, the Techmark in London and Neuermarkt in Frankfurt, will be based in Frankfurt. They are set to link with NASDAQ, the US high tech exchange, again improving liquidity.

Q:: What will happen to stamp duty?

A:: The merger "must surely sign the death warrant for stamp duty on share transactions", according to the Association of Private Client Investment Managers and Stockbrokers (APCIMS). This is because in Germany there is no stamp duty on share deals. In the UK stamp duty is currently 0.5 per cent per trade. Many City experts predict that the merger will encourage the British Government to drop stamp duty on share deals altogether, at some stage in the future.

Q: Will the merger have any impact on stockmarket indices and tracker funds?

A: It should open the doors to new tracker funds based on bigger companies in a larger number of countries. A unit trust tracking the shares in the hundred biggest companies in the IX would look very different to existing tracker funds based on the FTSE 100.

Click on www.londonstockexchange.com for more details.

The Financial Services Authority consumer helpline is on 0845 606 1234 or have a look at www.fsa.gov.uk. Click on www.apcims.co.uk for the APCIMS website. ProShare is on www.proshare.org

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Customer Service Advisor

    £15000 - £16000 per annum: Recruitment Genius: A Customer Service Advisor is r...

    Ashdown Group: Trainee Consultant - Surrey / South West London

    £22000 per annum + pension,bonus,career progression: Ashdown Group: An establi...

    SThree: HR Benefits Manager

    £40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

    Recruitment Genius: Office Manager / Financial Services

    £30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

    Day In a Page

    The difference between America and Israel? There isn’t one

    The difference between America and Israel? There isn’t one

    Netanyahu knows he can get away with anything in America, says Robert Fisk
    Families clubbing together to build their own affordable accommodation

    Do It Yourself approach to securing a new house

    Community land trusts marking a new trend for taking the initiative away from developers
    Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

    David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

    The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
    Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

    Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

    Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
    With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

    Money, corruption and drugs

    The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
    America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

    150 years after it was outlawed...

    ... America's first slavery museum is established in Louisiana
    Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

    Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

    The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
    Tony Oursler on exploring our uneasy relationship with technology with his new show

    You won't believe your eyes

    Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
    Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

    Moores must go. He should never have been brought back to fail again

    The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
    War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

    The battle for Mosul will unleash 'a million refugees'

    Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn
    Yvette Cooper: We can't lose the election. There's too much on the line

    Yvette Cooper: We can't lose the election. There's too much on the line

    The shadow Home Secretary on fighting radical Islam, protecting children, and why anyone in Labour who's thinking beyond May must 'sort themselves out'
    A bad week for the Greens: Leader Natalie Bennett's 'car crash' radio interview is followed by Brighton council's failure to set a budget due to infighting

    It's not easy being Green

    After a bad week in which its leader had a public meltdown and its only city council couldn't agree on a budget vote, what next for the alternative party? It's over to Caroline Lucas to find out
    Gorillas nearly missed: BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter

    Gorillas nearly missed

    BBC producers didn't want to broadcast Sir David Attenborough's famed Rwandan encounter
    Downton Abbey effect sees impoverished Italian nobles inspired to open their doors to paying guests for up to €650 a night

    The Downton Abbey effect

    Impoverished Italian nobles are opening their doors to paying guests, inspired by the TV drama
    China's wild panda numbers have increased by 17% since 2003, new census reveals

    China's wild panda numbers on the up

    New census reveals 17% since 2003