(August 11) – Did online brokers make a mistake by launching themselves into the United Kingdom, asks The Economist.
Today’s issue of The Economist contains an article on the online trading business in Britain. It suggests that the big online firms may have made a mistake by focusing their European expansion on the UK, which has been relatively slow to adopt the service.
The UK has fallen behind some of the continental countries, most notably Germany, in the online business. There are only about 200,000 online trading accounts in Britain, compared with more than 1.5 million in Germany. Account growth there is also slower than many other places, such as France, Italy, Spain and the Netherlands.
It cites a new report by J.P. Morgan which finds that the UK has 33% of European shareholders, but only 7% of the online accounts. J.P. Morgan speculates that low savings rates in the UK and low investment assets among the young may partly explain Britain’s lag. However, it also fingers Britain’s awkward clearing and settlement system as the biggest problem.
Yet firms such as TD Waterhouse, Charles Schwab and DLJ Direct have all made the UK their beach-head into European trading. The Economist suggests they may not be pleased with that decision, quoting Bob Dusté, chief executive of Charles Schwab Europe, as admitting that, “with hindsight, his firm might have concentrated harder on other markets in Europe”.
TD Waterhouse recently announced a joint venture with Banque Generale du Luxembourg to offer discount brokeraqge throughout continental Europe. Yet so far, crossborder business within the European Union has been slow to develop. None of the big global firms has much of a share there, as clients have generally stuck with homegrown firms.
-IE Staff