LSE To Offer US Stocks To Retail Investors

by Caroline Maxwell, Investors Offshore.com

08 June 2001

As part of its International Retail Service, launched in April, the London Stock Exchange has revealed that from Monday, it will be offering UK retail investors the chance to trade in all 30 stocks of the Dow Jones index. The move is aimed to give UK investors access to blue-chip international stocks such as Microsoft, Philips, and Nestle, and has been praised by investors and market makers alike.

Previously, investing efficiently in international stocks such as these would normally have entailed the holding of the shares overseas in a dollar denominated account, and the trading of each company's American Depositary Receipt. However, thanks to the LSE, UK investors will now be able to trade in sterling, which does away with the inconvenience of trying to compare stocks in different currencies and also the risks caused by fluctuating exchange rates. Trades will be executed through the exchange, and investors will be able to use the same brokerages as they do for UK stocks.

Another new service which has won praise is the LSE's new electronic trading platform, CREST, which makes straight-through processing much easier for brokers, who have lowered their charges per transaction as a result. 'Some brokers were charging fees of around £20 for each transaction,' said Stephen Roberts, the head of European dealing at Winterflood Securities. 'Now that's come down to £1.50 or as little as 50 pence.'

Several large organisations, including CSFB, Merrill Lynch, and Winterflood Securities have already signed up as market makers to generate prices in the stocks, although Richard Hunter of NatWest Stockbrokers, who have signed up for the service, believes that it is early days yet, but is confident that the new move will be a success: 'It is a bit of a chicken and egg situation at the moment,' he told the Financial Times. 'The spreads on the quotes are quite wide because the volume is thin but by the same token, when the spreads narrow, it will draw more business in.' Even those who haven't signed up for the service yet are expressing an interest in doing so soon. Barclays Stockbrokers, for example, polled its clients recently, and found that between one quarter and one third were interested in investing in international shares.

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