Renewed confidence is beginning to permeate the equity markets, writes Gretchen Friemann

With the aftershocks of the devastating 1990s stock market collapse still rippling through investors' bank accounts, many consumers remain justifiably sceptical of plunging back into equities.

But the emergence of a new execution-only stockbroking service from Cork is evidence that the do-it-yourself investment market is beginning to show signs of life once more with the lure of cheap commission rates and explosive stock markets.

Since the beginning of the year, major global indices have recorded robust double-digit increases, holding out the promise once more of profitable returns for private investors.

Day traders, whose rash investments came to symbolise the excesses of the late-1990s bubble, now seem to be piling back into the market with Barclays stockbrokers, the UK's biggest execution-only retail stockbroker, recording a 50 per cent surge in volumes since March.

ComPeer, a UK market research group, published a survey earlier this month that showed a 42 per cent increase in trades between April and June, with the number of clients rising to 395,000.

There's a good reason why private investors are risking another bite of the cherry. Since March, a renewed confidence has permeated equity markets and the year-to-date figures for the major indices make for reassuring reading.

At the time of writing, the Dow Jones and Standard & Poor's 500 indices had risen by 13 per cent and 14 per cent respectively since the start of the year. The DAX is up by 23 per cent, despite Germany's recession, while the Footsie has climbed 8 per cent higher.

Even the technology sector is shaking off its anaemic pallor, with the Nasdaq recording a 35.2 per cent jump since January, making it one of the best performing major indices so far this year.

It's good news too for the ISEQ, which has rebounded by 14.6 per cent.

According to Mr John Crowley of Sharewatch - a Cork-based financial services company that introduced its new low-cost, telephone trading service earlier this month - private investors are regaining confidence.

And he believes that the 0.30 per cent commission Sharewatch charges, the lowest in the State for telephone execution-only trades, will prove irresistible to private investors who "don't manage a large portfolio and just want a simple share transaction".

In the Republic's increasingly competitive private-client stockbroking environment, Sharewatch is hoping to strip market share from its more established competitors and, on the face of it, the company's minimum €30 transaction fee looks like an unbeatable bargain.

Both Davy and Goodbody, the two largest stockbrokers in the Republic, levy a commission fee of 1.65 per cent - a more than five-fold increase on Sharewatch's rate. Fexco stockbrokers, another execution-only trading service and Sharewatch's closest rival, offers a commission of 1.25 per cent and a minimum charge of €32.50 on a €5,000 trade.

Davy and Goodbody stress their online trading systems offer significant reductions on their telephone services with a trade of more than €25,000 carrying a commission fee of 0.5 per cent, although there are also account maintenance charges.

Despite the cheaper online rates from the large brokers, Mr Crowley believes there is a substantial market for private retail investors disenchanted with high commission fees for execution-only trades.

He argues that small investors would rather forgo the professional research and advice the large brokerage houses include as part of their service than continue to pay high commissions on simple trades.

He said: "The feedback we get is that people don't want advice on a small amount of shares. As far as we can see, investors want to get a good margin on their trade and if your stock rises by 1.25 per cent thethat means most of your profit has gone to the broker."

But, according to Davy's head of share dealing on the private-client desk, Mr Chris Connaughton, "trading is not just about low commission rates, it's about access and security".

He argues that investors trading through Davy have "access to all markets in all currencies and benefit from a straight processing system that cuts out any manual interception".

However, the cost of running such an extensive back office adds to Davy's overhead costs and explains why Sharewatch can offer the prices it does.

Buying stock through Sharewatch is the investor equivalent of flying with a low-cost airline. This is trading without any of the frills. There is no advice or research. Investors simply ring through their trade on a lo-call number to the company's partners in Glasgow, Direct Sharedeal, which executes, clears and administers the transaction.

According to Mr Crowley, Direct Sharedeal is not a member of the Irish Stock Exchange but accesses Irish shares through the London Stock Exchange.

Sharewatch, which is staffed by its three directors - Mr Crowley, Mr Peter Byrne and Mr Ger Iverson - originally attempted to set up as an online trading service more than three years ago but the deal fell through when the stockbroking firm they were partnered with was bought out.

Now Mr Crowley claims Sharewatch has its sights set on carving up the small investor marketplace. He estimates that its biggest competitor, Fexco, has a customer base of 25,000 to 30,000 and he is confident that Sharewatch's rates will soon begin to eat into the company's significant market share.

Fexco stockbrokers, a division of the Fexco financial services group based in Killorglin, was ordered by the Central Bank in January 2000 to stop accepting new business until it had taken on sufficient staff and upgraded its systems to handle the volume of business it had attracted at that point.

The company has since satisfied all Central Bank requirements and its deputy managing director, Mr Denis Crowley, stresses he is "comfortable with Fexco's pricing structure", although he conceded Sharewatch's commission rates "appear to be very competitive".

Fexco is not the only low-cost stockbroking firm to have suffered trading restrictions. BCP Stockbrokers received a similar reprimand from the Central Bank in the same year, as the number of people who owned shares in the State rocketed to more than 500,000 following the Eircom flotation.

Then there was the collapse two years ago of Cork stockbroker W&R Morrogh.

It is incidents like these that Davy's Mr Connaughton points to when he stresses the importance of "security and access".

Sharewatch is regulated by the Irish Financial Services Regulatory Authority. It is a privately owned company, which is more than 60 per cent owned by the three directors. Independent News & Media took a 15 per cent stake in the company three years ago.

Mr Gareth Doyle, who is the son of the Irish Independent's editor, Mr Vincent Doyle, serves as a non-executive director on the company board.