London Stock Exchange makes access to markets simpler, more transparent and cost effective for private investors

News - Banking

Written by Ray Clancy

Monday, 26 July 2010 10:33

London Stock Exchange is adding a new private investor price promotion aimed at allowing them to participate more directly in its markets.

The Private Client Broker tariff incentive is set to encourage order book access, follows real time market data pricing scheme and offers customers the ability to direct their business straight onto the Exchange’s order books.

From 2 August 2010 private client brokers can sign up for the new pricing scheme and benefit from six months free trading when they direct clients’ orders straight through to the Exchange’s order books, followed by a special lower charge of 0.10 bps for those orders.

This is a more than 75% discount on the typical 0.45 bps charge under the current tariff the London Stock Exchange said.

The promotion is designed to encourage private client brokers to offer their clients the ability to more actively interact with the Exchange’s markets, through services such as Direct Market Access (DMA). The expected additional flows from private investors will also benefit other market participants, with the extra liquidity it brings.

‘We are working hard with brokers to make access to our markets simpler, more transparent, and more cost effective for private investors. We already have the most liquid market in Europe for trading equities and we are keen to grow the order flow from retail brokers,’ said Nicolas Bertrand, head of equity and derivatives markets at London Stock Exchange Group

‘This new pricing scheme will make it cost effective for private client brokers to offer their customers the option to trade directly on the Exchange’s order book. This will complement existing methods of dealing in London-listed securities and build on the thriving retail investment community in the UK already established by the large and successful market maker community,’ he explained.

The initiative has already received support from the private client broking community, with several firms set to sign up from the start of the promotion.

In the UK there are currently estimated to be 25,000 private investors who frequently trade, and approximately £20 billion, or around 2% of value traded on the UK order book, originates from retail brokers each year.

In comparison, London Stock Exchange Group’s Italian equity markets are estimated to facilitate approximately €200 billion worth of trading from retail sources annually, and there are estimated to be 150,000 private investors in Italy.

The pricing promotion is the latest in a series of initiatives by the Exchange aimed at facilitating better access to financial markets for private investors. The Exchange has been working with member firms to extend the availability of Direct Market Access (DMA) to retail clients.

In recent years the Exchange has established a highly liquid Exchange Traded Fund (ETF) market, with approximately £14 billion worth of ETF trading on the Group’s London markets in the first six months of 2010.

In February this year it launched the Order Book for Retail Bonds (ORB) to give private investors greater access to fixed income investment.

Last week the Exchange announced a pricing promotion on real time market data aimed at the private investor community, to further widen the availability of high quality order book data.