The surging bull market in technology stocks and the growing attractiveness of trading shares online is placing Irish stockbroking firms under increasing pressure to offer online services to existing and new clients.
However, the stockbroking community's efforts to offer customers online trading facilities here have been frustrated by the collapse of a deal between the Paris Bourse and the Irish stock exchange (ISE) to put an electronic trading system in place here by the end of this year.
Most trades currently conducted through Irish stockbroking firms are ISE transactions and it now looks like it will be late next year before the ISE goes online.
Dublin stockbrokers expressed surprise this week at the rapid adoption of online trading in Britain where, in the last four weeks, stock trading by small investors has trebled. Cheap commissions and even free dealing services have prompted an army of thirty-something investors to place average orders of around £3,600 (€4,570) for up and coming technology and Internet stocks.
The phenomenon is expected to be further boosted by this week's announcement that US firm, TD Waterhouse - a discount stockbrokers - is planning to lend money to British customers to buy shares, or trade on margin. This allows investors to delay payment for shares in the hope of making profits in the interim. The move is part of the company's strategy to become the first mass-market provider of margin trading in Britain. E-Trade, another well established US broker with a British presence has said it is developing systems for margin trading. It is recording daily trades as high as 35 to 40 per investor.
However, consumer groups and regulators are expressing grave concern that such services invite investors to take on very high risks.
The Financial Services Authority in Britain last week warned investors to consider more carefully the investments they are making. With many of the trades there "execution only", amateur investors do not appear to be seeking formal advice from brokers. NCB private client broker, Mr John Kielty, warned: "We would urge people to be cautious about dealing in technology stocks. Remember this happened before in the exploration sector. There is going to be consolidation within the technology industry, and not all companies are going to be successful. It's worth noting that a number of these Internet companies have no trading history."
There is no Irish-based option available for private investors to take a flutter online although NCB is probably the most advanced stockbroking firm in terms of an Internet offering.
Its site receives an average of 10,000 hits per day, even without a trading option. Because more than 50 per cent of NCB's business is now non-Irish it hopes to provide electronic dealing services to the London stock exchange and the US Nasdaq by the second quarter of 2000.
The service will only be open to registered NCB clients initially, and any expansion of the online offering at a discounted rate will be based on economies of scale. The greater the take-up, the more likely there will be savings. But as Mr Kielty points out, Irish market penetration of the Internet is still very small and NCB is not entirely convinced that there will be a huge demand.
However, if the experience in Britain - admittedly a much larger market - is anything to go by, there is bound to be a market here for online trades.
Last month, the London AIM exchange for smaller stocks recorded more transactions than in the whole of last year. Daily deals on the London stock exchange have boomed from around 60,000 a day at the start of the year to more than 120,000. There are now more than two billion shares regularly passing through the market each day.
A number of reasons have been put forward for the surge in activity, including the launch of techMARK, the stock exchange's technology market, at the beginning of November.
Low interest rates are also being credited with encouraging investors to take their money out of deposit accounts and place it somewhere where they can try to pick up good short-term returns - albeit at a risk.
"Many investors also feel familiar with the technology industry because they use technology on a daily basis, so they take an interest in certain players and monitor their progress," Mr Kielty says.
Contributing to this quasi-hobbyist approach to investment are Internet bulletin boards. Easily accessible, they offer immeasurable amounts of unverified information on technology stocks, often peppered with rumour and speculation. However, they are free, and offer the independent trader a modicum of industry advice.
From a situation a year ago, where a £6,100 (€7,745) trade cost £73 plus stamp duty, Britain has now arrived at a point where the same trade can be conducted for £10, or zero during the first 30 days of trading. With the cost of entry so low, it is now estimated there are 70,000 Net traders in Britain, and hundreds more coming onstream every day.
According to Mr Phillip McAuliffe, information systems e-commerce manager at Davy Stockbrokers: "The threat of individuals trading electronically is very difficult to quantify. In the next six to 12 months we will need to be in a position to react by having an architecture valid for online trading in place."
Davy and NCB say they are looking very closely at the opportunities thrown up by wireless technology, where they can offer online trading services through mobile phones. It is possible that wireless application services is the one area where European companies might gain a lead time over their US counterparts.
Meanwhile, the Irish stock exchange seems relatively unconvinced that online trading by private individuals is going to take off here. According to general manager, Mr Tom Healy: "We believe it will increase, but not as rapidly as it has done in the US. We can't see a vast majority of private client dealing happening this way. They are more likely to seek broker advice beforehand."
