UK
shares
All stock broking services deal in London
Stock Exchange (LSE) and Alternative Investment Market (AIM)
stocks, and are settled via CREST, the share settlement company.
Most online services will automatically hold your shares in a
nominee account, rather than in a certificated format.
An increasing number of services enable you to
deal in foreign equities as well, although these are usually
restricted to US and European exchanges. A range of overseas shares
now trade through the LSE's International Retail Service (IRS),
which are quoted in sterling and settled in CREST.
Margin products
You can routinely trade margin products online
alongside your share trades. Margin products include:
- Futures ( www.odlsecurities.com/,us.etrade.com/e/t/home)
- Options (http://www.odlsecurities.com/
- Traditional warrants – available from
Sharedeal, ETrade, Halifaxsharedealing.com, Hargreaves Lansdown,
Hoodless Brennan, Odl Securities, Stocktrade, TD Waterhouse
- Covered warrants –available with Comdirect,
Etrade, iDealing, Odl Securities, TD Waterhouse and The Share
Centre.
- Contracts for Difference or
CFDs (Interactive Investor, Barclays, ETrade,,
iDealing, Odl Securities, Self Trade, TD Waterhouse)
- Spread Betting (TD Waterhouse, ODL
Markets, TradIndex.com, mfGlobalspreads.com, cityindex.co.uk
Margin products require you to put down a
deposit, which is a small percentage of the underlying value of the
trade. This is called the 'margin.'
Collective Funds: investment trust, units trusts and Oeics
- Investment trusts are companies which invest
in other companies’ shares and are traded just like any other
share. For more details, read our Guide to Investment Trusts.
- Many online share dealing services run ‘fund
supermarkets' where you can buy and sell unit
trusts and Oeics, with a discount on
initial charges.
- Exchange Traded Funds or
ETFs, despite their name are actually shares which
mirror an index for a group of shares or other assets. For more,
read our Guide to Exchange Traded Funds. Dealers trading ETFs
include Halifax, HSBC, iDealing, IWeb, Self Trade,
ThisisMoney, 7 Investment Management and The Share
Centre.
Self select tax sheltered accounts
Self select ISAs: about
half of share dealing services offer a self select
ISA service so check availability;
PEP transfers: only around 50 per cent of
stockbrokers allow you to transfer in old Pep accounts.
Self Invested Personal Pensions
(Sipps): In most cases, the broker sub contracts the Sipp
administration to an outside agency and just supplies the share
dealing facilities itself.
What quotation and dealing services are
available?
Virtually all online share dealing services
provide 'straight through processing' (STP), whereby you receive
your price quotes from the market via your broker. However, there
are several different types of quotation and dealing service:
Real-time snapshot quotes
Snapshot quotes (also known as “html” quotes)
are held for a fixed period of time (normally. 15 seconds). If you
fail to accept the price within this time, the quote lapses and you
have to request a new one from the broker.
A number of services like Barclays operate
'price improvement services' which improve upon the price for you
if it moves in your favour while the quote is being held. Shares
that are bought and sold on the basis of real time price snapshots
are said to be dealt 'at quote.'
Live Streaming Prices
Live streaming price quotes (or 'Java' quotes)
are not held at all. Prices change simultaneously with those on the
exchange. You deal by hitting the trade icon when the price comes
within your range. Deals are executed 'at best'. What you see is
what you get.
Dealing at live streaming prices is available
through day trader orientated services like myBroker, Power Etrade
and TD Waterhouse Pro Trader.
Indicative Quotes
With some services, the price you choose to
buy at is not necessarily the price you get. Such deals are said to
be executed 'at best,' namely, your broker obtains the best
price he can.
Automated Dealing
An alternative to dealing at real time
snapshots or live, streaming prices is to programme automated
trades that are executed when prices hit a critical level.
Limit Orders
A limit order is an instruction to execute a
deal when the share achieves a given price. For example, you could
give an instruction to buy a certain share if it fall to
a certain level below the current market price, or to
sell at a specified higher price.
Most brokers will not keep this type of order
open forever. An exception is James Brearley & Sons which will
hold limit orders open indefinitely.
‘Kill or fill’ limit orders
are acted on at once. If the order cannot be 'filled,', it is
‘killed.’ This type of limit order is often used for instructions
placed after market hours. The broker will try to execute it first
thing the next day.
‘Good for the day’: the limit
order is held open till the end of the trading day in which it is
submitted. If it cannot be executed within this time, it is
killed.
‘Good for 'N' days’: the
limit order is held open for a given number of days (eg. 14, 30,
90). The order is executed if the price limit is reached, or killed
off if it cannot be executed within the set time.
Stop orders: stop orders are
instructions to buy or sell shares at pre-determined price levels.
If the price moves very fast, it may not be possible to execute the
stop in time:
Stop loss: an instruction to
sell a stock if it falls to a given level within a
set period. On iDealing, the trader sets a band, rather than a
single, trigger price.
Stop buy: an instruction to
buy a volume of shares, if the price hits a pre-determined
price, or band, to exploit an upward trend in the share price.
Tracking stop loss: The stop
loss shadows the actual share price as it rises, and realises the
gains if and when the share price turns down. This is available on
The Share Centre Fastrack service.
What are the basic costs?
dealing commission as
a percentage of the deal, usually with
a fixed minimum and maximum. This is good for larger deals,
but clearly poor value for smaller deals; or
flat dealing fee:
usually accompanied by an account fee (Egg, iDealing,
Fidelity ShareNetwork), although a few brokers charge flat-rate
commissions and zero account fees like Hoodless Brennan and
Alliance Trust Savings.
frequent trader rates: these
may apply if you execute a large number of trades each
quarter.
stamp duty: at 0.5 per cent
on all purchases rounded up to the nearest 1p for CREST-settled
transactions, and to the nearest £5 for non-Crest-settled stocks,
plus a levy of 25p on deals above £10,000.
Setting up charges: these are
variable, but some online services have no establishment fee.
Other charges
account maintenance fees:
these include dividend processing, corporate actions (takeovers,
mergers and acquisitions, splits), the CREST nominee facility,
electronic cash transfers and record keeping.
inactivity charges: for
not trading within a specified period, usually a quarter.
stock transfers (in and
out)
account closure fees
duplicate contract notes and
paper valuations
research, and
probate valuations and
dealing with executors.