Internet share trading doubles every fortnight

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The Independent Online
ONLINE SHARE dealing is exploding in popularity in the UK, with Internet-based stockbrokers seeing business double every fortnight. Some of the companies are struggling to keep pace with demand, which now sees as many shares traded online in a single week as in the whole last half of 1998.

Online brokers believe that the Internet is now turning the efforts of Margaret Thatcher to create a "share-owning democracy" into reality. "She created a lot of people with share certificates in their drawers; now we're seeing people pulling them out and saying to themselves, `Maybe that piece of paper can achieve some real value'," said Guy Knight, European vice-president of the largest online dealing firm, Charles Schwab.

Many Internet traders are buying shares in new technology firms. This week the share price of the "free" Internet service provider, Freeserve, has soared to a record high to give it a market capitalisation of over pounds 5bn, more than its parent company Dixons. Meanwhile, QXL, an online auction site, has seen its share price rise by more than 25 per cent in the past two days, closing at more than 880p last night.

Online traders differ from those using older forms of share dealing, said Tom Sheridan, head of business development at Barclays Stockbrokers. "Compared to people who deal in shares over the phone, they buy more than they sell - they're investors, overall,"

After Barclays online trading started in March, volumes have rocketed: "two weeks ago we hit a record with 1,000 transactions in a day; now it's running at 2,000," Mr Sheridan said.

Charles Schwab is struggling to recruit sufficient staff to cope with its telephone share business - but is also seeing rapid growth in dealing via its Web site. "We're doing as much business in a week now as we did in the last seven months of 1998, since we launched in June," said Mr Knight. He reckons that half of the share dealing business now comes from Web transactions rather than telephone trading, while at Barclays the figure is estimated to be about 20 per cent.

However, the growth in Web dealing is not expected to presage the rise of "day traders". In the US, some people are staking their financial existence on buying and selling stocks online, trying to make money by exploiting tiny price movements. At the end of each day they have to settle their accounts. Only a few people are reckoned to make a successful living from it - while the rest are believed to be losing heavily.

"The UK market would not support that sort of behaviour," Mr Knight said. "There's government stamp duty on each transaction, and the sort of margin trading that it needs isn't allowed by most brokers."

There have been hiccups in the provision of services. Two weeks ago the Halifax suspended its online share service after customers using the system were shown details of other peoples' accounts. The fault could have allowed people to trade in others' names, a potentially serious breach. However the Halifax said no such trades were carried out, and has blamed insufficient tests on new software.

FIVE STEPS TO ONLINE DEALING

1) You will need: A PC with a browser, a 56K or V90 modem and an internet account.

2) Pick a trader: Ask whether the site works with your computer? (Not all do.) How fast is it? (Some use unnecessarily fancy graphics which are slow to load.) How much will you be charged? How soon must you settle? How good is the security? How up-to-date is the stock information?

3) Before buying: Pick a share and decide how much to spend. Fees are typically around pounds 15 plus 0.4 per cent of the sum spent. Most people spend between pounds 3,000 and pounds 5,000 to minimise the overhead, but competition is bringing prices down.

4) Before selling: Check that you have the share certificates, or can get hold of them in a couple of working days.

5) Begin trading: The stock market can be akin to a gambling den. You may win and you may lose, but you will always end up paying the "house". Don't bet your own house.

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