'The merger will not bring down charges for smaller share dealers'

The London and Frankfurt Stock Exchanges are to merge! So what, I hear you ask. Paris, Brussels and Amsterdam have already announced they are getting together. New Zealand is cosying up to Australia. And, anyway, what does the merger of two stock exchanges really mean to me, a private investor?

The London and Frankfurt Stock Exchanges are to merge! So what, I hear you ask. Paris, Brussels and Amsterdam have already announced they are getting together. New Zealand is cosying up to Australia. And, anyway, what does the merger of two stock exchanges really mean to me, a private investor?

It is important to understand why this merger is proposed. First there is the threat that the internet presents to established markets. In the United States, an increasing amount of business is being carried by so-called ECNs (electronic communications networks). A number have applied to become recognised exchanges in their own right. Indeed, one has brought in the Pacific Stock Exchange as shareholder and partner to speed the process. Europe may look a little less vulnerable to these new trading platforms but they are a threat that is unlikely to go away.

The global institutions - those professional fund-management operations that trade and own shares all around the globe - are the second driving force. These are important customers for stock exchanges, and they want to see dealing costs driven down. This becomes much easier if the number of exchanges reduces.

Hold on a moment, though. Where have we heard this before? Big Bang in the London Stock Exchange back in 1986 was all about deregulation and cheaper dealing. Until then, stockbrokers' commissions had been fixed. One result of Big Bang was to drive commission rates which started at 1.65 per cent swiftly down to 0.2 per cent for the biggest traders. Subsequently, rates have slimmed even further. The benefits to the investing institutions were immediate and considerable.

And what happened to the private investor? Not much. True, there are now execution-only houses which provide a no-frills dealing service at rates considerably below those that applied before Big Bang. But traditional advisory stockbroking services continue to attract charges between 1.5 and 2 per cent of the value of the trade.

I see no reason why a new pan-European exchange, operating across borders and using systems common to the rest of world, will benefit the smaller buyer and seller of shares. Charges are unlikely to rise, but they are also unlikely to fall.

Apart from that, there is talk of shares being denominated both in sterling and euros - something the Global Player is unlikely to be concerned about, but which will not necessarily be welcomed by the person with a £100,000 portfolio.

Then there is the question of what might happen to indices. Already a number of pan-European indices have been created to reflect the growing globalisation of investment business and it could be that these will ultimately replace such familiar benchmarks as the FT-SE 100.

If you think things are moving fast now, just wait.

Brian Tora is chairman of the Greig Middleton investment strategy committee

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

News
people
News
Andy Murray with his girlfriend of nine years, Kim Sears who he has got engaged to
peopleWimbledon champion announces engagement to girlfriend Kim Sears
Arts and Entertainment
An unseen image of Kurt Cobain at home featured in the film 'Kurt Cobain: Montage of Heck'
filmThe singers widow and former bandmates have approved project
Sport
footballArsenal 2 Borussia Dortmund 0: And they can still top the group
PROMOTED VIDEO
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

    Langley James : IT Support; Helpdesk, VMware; Manchester, £18k

    £16000 - £18000 per annum: Langley James : IT Support; Helpdesk, VMware; Manch...

    h2 Recruit Ltd: Business Development Manager - HRO - £70k+ ote

    £35000 - £450000 per annum + £3k car, £70k ote: h2 Recruit Ltd: Do you want to...

    Citifocus Ltd: Newly Qualified Accountants - Risk Mgmt

    £Attractive Package: Citifocus Ltd: Prestigious financial institution seeks to...

    Citifocus Ltd: Operational Risk Analyst

    £Negotiable: Citifocus Ltd: Experienced operational risk professional with ban...

    Day In a Page

    Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

    Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

    It's in all our interests to look after servicemen and women who fall on hard times, say party leaders
    Millionaire Sol Campbell wades into wealthy backlash against Labour's mansion tax

    Sol Campbell cries foul at Labour's mansion tax

    The former England defender joins Myleene Klass, Griff Rhys Jones and Melvyn Bragg in criticising proposals
    Nicolas Sarkozy returns: The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?

    Sarkozy returns

    The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?
    Is the criticism of Ed Miliband a coded form of anti-Semitism?

    Is the criticism of Miliband anti-Semitic?

    Attacks on the Labour leader have coalesced around a sense that he is different, weird, a man apart. But is the criticism more sinister?
    Ouija boards are the must-have gift this Christmas, fuelled by a schlock horror film

    Ouija boards are the must-have festive gift

    Simon Usborne explores the appeal - and mysteries - of a century-old parlour game
    Can SkySaga capture the Minecraft magic?

    Can SkySaga capture the Minecraft magic?

    It's no surprise that the building game born in Sweden in 2009 and now played by millions, has imitators keen to construct their own mega money-spinner
    Christmas 2014: 23 best women's perfumes

    Festively fragrant: the best women's perfumes

    Give a loved one a luxe fragrance this year or treat yourself to a sensual pick-me-up
    Homeless Veterans Christmas Appeal: Drifting and forgotten - turning lives around for ex-soldiers

    Homeless Veterans Christmas Appeal: Turning lives around for ex-soldiers

    Our partner charities help veterans on the brink – and get them back on their feet
    Putin’s far-right ambition: Think-tank reveals how Russian President is wooing – and funding – populist parties across Europe to gain influence in the EU

    Putin’s far-right ambition

    Think-tank reveals how Russian President is wooing – and funding – populist parties across Europe to gain influence in the EU
    Tove Jansson's Moominland: What was the inspiration for Finland's most famous family?

    Escape to Moominland

    What was the inspiration for Finland's most famous family?
    Nightclubbing with Richard Young: The story behind his latest book of celebrity photographs

    24-Hour party person

    Photographer Richard Young has been snapping celebrities at play for 40 years. As his latest book is released, he reveals that it wasn’t all fun and games
    Michelle Obama's school dinners: America’s children have a message for the First Lady

    A taste for rebellion

    US children have started an online protest against Michelle Obama’s drive for healthy school meals by posting photos of their lunches
    Colouring books for adults: How the French are going crazy for Crayolas

    Colouring books for adults

    How the French are going crazy for Crayolas
    Jack Thorne's play 'Hope': What would you do as a local politician faced with an impossible choice of cuts?

    What would you do as a local politician faced with an impossible choice of cuts?

    Playwright Jack Thorne's latest work 'Hope' poses the question to audiences
    Ed Harcourt on Romeo Beckham and life as a court composer at Burberry

    Call me Ed Mozart

    Paloma Faith, Lana del Ray... Romeo Beckham. Ed Harcourt has proved that he can write for them all. But it took a personal crisis to turn him from indie star to writer-for-hire