A brighter future for European online investors?

Online share trading in the US - enabled by companies like Ameritrade, Charles Schwab and E*Trade - has played a major role in creating the current bull market on Wall Street.

A generally sound economic policy, low interest rates and increased productivity (mainly through the use of IT) have all encouraged private investors to get online. Day traders who buy and sell shares in companies like Amazon.com and AOL have forever changed the way markets work.

Several analysts at leading US investment houses have even questioned their positions in certain companies when prices can be skewed by John Doe with Net access and an $8 per trade Ameritrade account.

Now several companies are trying to repeat this success in Europe - but progress hasn't been rapid.

Michael Walton, CEO of Nvision, an Internet consultancy, said: "It's still too expensive to trade [over the Internet in the UK], and you have to pay stamp duty. But there has to be sufficient competition before the government can be properly pressured into reducing the tax."

One Silicon.com viewer said: "Judging by the commissions charged, it seems share operations over here are either geared for rich people, or people making a one-off deal. They're not for those who want to dip in and out of markets every day, or even a few times each day."

A UK investor selling several hundred pounds of shares in a demutualised building society or even a company privatised in the 1980s probably wouldn't balk at a £25 transaction fee. But try trading regularly with those charges and your margins suffer.

Share trading - and trading over the Internet - should be popular in many European countries. Interest rates are low in Euroland and beyond. This means bank and other accounts make poor investment vehicles, and alternatives like property and shares become attractive.

Also, while still behind the US, the level of Internet use in Europe is growing fast. The free access phenomenon - maturing in the UK, but still in its infancy elsewhere - will particularly increase the numbers of people online.

The answer for some providers is to create a portal site with several services. Last month saw the launch of Barclays.net for example. While not a panacea for all customers' online woes, the service has made up for some of the bank's past online sins by offering free Internet access, banking and share trading.

But again, the minimum charge is a 1.5 per cent commission, or £17.50.

Nvision's Walton reckons another possible boost could be on the horizon. "Once traders in Europe can easily access Nasdaq to trade high-tech shares we could see a lot more activity."

Charles Schwab has said this is something its users asked for and from 1 June will be providing that service.

But Guy Knight, VP of European marketing at Charles Schwab, defended the European take up of Web-based trading. "You have to realise, there are about 110 online services US investors can use. In the UK, there are about three. But it's just that they've had a head start - after four years, we do about 65 per cent of our US business on the Web. In the UK, the figure is 25 to 30 per cent after a year, and that's quite a quick take up."

Once competition increases and costs fall further, the popularity of online trading in Europe will undoubtedly shoot up.