Virtual share trading soars

Online share trading has been in Australia for two years, and now Internet stockbrokers are fighting for business through full-page press and television advertising.

Sanford Securities deputy managing director Stephen Goh asks, “Why the rush?”

“One reason is the growth,” he said. “If the number of online traders in the US is anything to go by, Australia’s Internet stockbrokers certainly have a bright future.

“In the US, there are 20 million users of Internet share-related financial services, representing approximately seven per cent of the population.

“The Australian industry is a couple of years younger than the US industry, but based on US figures we can estimate that there will be approximately one million Australians using Internet services to manage their personal finances by 2002.”

Green Line Investor Services deputy managing director David Curtis said Australia was one of the most Internet savvy markets in the world and was developing as a crucial territory for online trading.

One of the pioneers of online trading, Green Line introduced their service in Canada in 1993 and was one of the first broking houses in the US (Waterhouse Securities) to offer trading over the Internet.

Today, Green Line is the second largest electronic broker in the world (having surpassed ETrade in 1998), processing over 60,000 online trades per day – more than 1.5 times the daily volume of the Australian Stock Exchange.

“Some 30 per cent of Australian trades are already executed online every day,” Mr Curtis said.

“In Canada, more than 50 per cent of Green Line trades are done over the Internet, while in the US nearly 70 per cent of Water-house’s trades are executed electronically. If these trends are any indication, the uptake here will be significant.

“The future of online trading in Australia looks set to follow a similar pattern, with estimates that nearly ten per cent of the daily turnover of the ASX is completed over the Internet,” he said.

Mr Goh said this figure was bound to grow “and it is not only the independent investor who is set to benefit,” he said.

“Internet stockbroking in Aust-ralia is underpinned by the fact that the country possesses one of the highest percentages of share ownership in the world and Australians have demonstrated a rapid rate of adoption of Internet services over the past couple of years.”

Mr Curtis says the popularity of online trading had largely come about because “people were tending to lose faith in the idea that someone will look after them financially.”

“A different breed of investor is emerging,” he said.

“This investor has drive and, equipped with the research and necessary trading tools, now has the ability to take responsibility for their financial future.

“Additionally, Internet clients tend to trade two to three times more often than active telephone customers.”

Mr Goh said the growing number of online brokers was bound to ring in a period of rationalisation in the retail broking sector.

“So far there are more than 80 brokers operating in the market with over 50 of them sharing three quarters of a per cent of trading share – so it is hard to see how brokers doing less than two million shares a day will have the capital to support investment in necessary infrastructure,” Mr Curtis said.

Industry sources say there is an expectation in the industry that two factions will evolve – online brokers will battle for a share of the retail market while large institutions such as banks also attempt to get in on the action.

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