As the number of companies offering online stock quoting and trading services rises, small private investors are discovering they can pay lower commission fees by trading online rather than through stockbrokers.
Much of the interest comes from employees of information technology (IT) companies, introduced to the idea through company stock options. The natural home for publicly-quoted IT companies is the US-based Nasdaq, an electronic exchange, where profits are re-invested to spur growth and dividends are not paid. Irish companies on the Nasdaq include Iona Technologies and CBT Systems.
IT staff are familiar with the companies traded on Nasdaq. But one Irish software sales engineer, who preferred not to be named, found the per-transaction fees of the large Dublin stockbrokers prohibitive when he invested in Nasdaq companies - compared to the $50 (£33) or less charged by US banks and online companies.
Among the more well-known of Irish stockbrokers, Goodbody charges a minimum fee of £75 per Nasdaq transaction, NCB's minimum fee is £40, and Davy's minimum fee is £60. Bids have to be phoned in, and the stockbrokers generally pass these bids on to US agents. None of these companies could guarantee service after 6 p.m., although trading on the Nasdaq doesn't close until 9 p.m. Irish time. The fees include advice or instruction and execution of trades.
A spokesman for Goodbody said clients were "always talking to a registered representative of the stock exchange". He said many clients did not seek advice, but advice was available if they asked for it. He admitted that advice relating to "obscure" stocks on the Nasdaq would be "high risk".
The alternative is to invest via online traders on the Internet, many of whom have sprung up in the last few years. Generally, this is done via the Web, and involves setting up an account, transferring money into it, and trading. Commission fees are as low as $8 per transaction and the bid goes straight to the exchange without human intervention.
For those with the time to go looking, there is a lot of information about Nasdaq companies available online too. For example, one online service, The Silicon Investor, contains discussions on individual stocks which occasionally contain company information which may not be available elsewhere. However, some of the contributions are purely speculative.
Online Irish trading is probably not far away. BCP Stockbrokers have already launched an online advice service, and a spokesman said the company has plans for online trading, but couldn't say when this was likely to happen.
Another Irish service, Technical Investment & Underwriting (TIU), is also offering online advice. A TIU spokesman said there was no online trading in Ireland yet, saying there could be problems with Central Bank regulations.
However, a source at the Bank said: "There is no regulation which would prohibit any exchange, be it the Irish Stock Exchange or any other exchange, from providing services electronically, whether that be through the Internet or any other means."
Mr Kevin McHugh of the Stock Exchange said electronic trade allowed execution only, with no instruction. "If the client is happy with execution only, there are no regulations preventing them [online transactions]." But he said the client's identity must be clear to prevent money laundering.
Sources indicate that the Irish exchange may move to electronic trading within 18 months.
In the meantime, international online trading is set to flourish. Besides the US-based online trading firms, there are already several British ones, and Yahoo! is due to launch its own trading service early next year.
