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E*Trade launches in U.K.
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July 29, 1999: 9:43 a.m. ET
Internet-based broker eyes potential of 12M private British investors
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LONDON (CNNfn) - E*Trade, one of the biggest U.S. Internet brokers, Thursday introduced its low-fee trade to a British market just catching on to the online trading boom.
E*Trade estimates the potential market is about 12 million.
For a minimum commission of 14.95 pounds ($23.92) -- applicable to any trade less than 1,500 pounds -- British investors will be able to buy and sell stocks round-the-clock, in real time. That is slightly higher than the $14.95-$17.95 fee paid by U.S. E*Trade subscribers.
E*Trade views Britain's private investors as a ripe demographic group for the quick-execution stock-swapping service that has proved so successful in the United States, and generated more than $26 billion in trade from 1.2 million customers worldwide.
The vast majority of those investors are based in the U.S., where online brokering, while still in its infancy, has surged in recent months.
Stock trades channeled through the Internet shot up between 30 and 35 percent in the United States in the first quarter of this year, according to one recent estimate, to about 450,000 trades a day. The surge came even in the face of technical hitches and occasional outages at online Web servers that have at times hampered online trade.
Preceded by Schwab
E*Trade is preceded in the United Kingdom by Charles Schwab Europe -- the world's, and Europe's, leading online brokerage. Since launching its service in June of last year, Schwab has executed 530 million pounds worth of trades for 26,000 European online investors. Online trade accounts for roughly 60 percent of Schwab's total European brokerage business, a spokeswoman for the company said Monday.
DLJ Direct, a unit of U.S. investment bank Donaldson, Lufkin & Jenrette, also launched in the U.K. this week. There are a handful of other Internet brokers, including Stocktrade and Barclay's online, an electronic off-shoot of the British banking giant.
Schwab charges a minimum of 15 pounds for each trade conducted on the Web, with commissions rising for bigger trades. But under a "frequent trader" plan, users pay a flat fee of 19.50 pounds.
The Schwab spokeswoman said the company welcomed the competition from E*Trade, even as she expressed confidence that Schwab's familiarity with Europe would give the company an edge as it goes head-to-head with its feisty rival.
"We're coming from a position where we're in the lead at the moment," the spokeswoman said. ""We are established in the country already."
Keith Mallinson, the managing director of the Yankee Group, a technology consultant, said that while online investing remains "embryonic" in Britain, it has the potential to follow the U.S. growth curve as investors become more accustomed to the phenomenon, and come to trust the online system of trade.
In North America, Mallinson said, "the speed and the immediacy of Web-based trading has created a whole new way of doing things."
In Europe, he said, the success of online brokering will "depend on the mechanisms adopted. There is still great hesitancy about submitting sums over the network." Mallinson used the analogy of electronic banking, which has gained credence as customers have come to establish a relationship of trust with the bank.
The demise of the "dinosaurs"?
Mallinson added that the advent of online brokers in Britain will ultimately lead to a demise of some of the "dinosaurs" offering traditional services, often at unjustifiably high costs.
"At the moment, you're forced into using the Rolls Royce solution, even if you just want pure execution," he said. "A lot of the brokers who have exploited that, they're going to be in trouble…The high end of the market will prevail. But there is still going to be a fair amount of attrition in the sector."
E*Trade, analysts say, is a perfect vehicle for "amateur-expert" investors simply looking for convenient and fast ways to execute transactions.
Judy Balint, E*Trade's international president and chief operating officer, said the company is entering the United Kingdom at a time of soaring residential Internet use. There have been more than 4.2 million Web connections so far this year, and that link-up rate is expected to reach 7 million by 2000.
"People in the U.K. want the freedom to invest simply," Julian Costley, the chief executive officer of E*Trade U.K. said in statement. "Traditional brokers and first-run attempts at U.K. Internet-based services miss this basic point. Investors want lots of powerful unabridged information at their fingertips, and help as they research the markets."
E*Trade U.K., like its U.S.-based sibling, offers research tools, real-time stock prices, fundamental data and charting. This is provided by its U.K. partner, Electronic Share Information Ltd
The service uses a high-grade encryption standard that it claims is "the toughest to break and a more stringent level of security than that used by most other online services."
E*Trade U.K. users must also pay a fixed quarterly account management fee of 12.50 pounds. 
E*Trade's CEO Julian Costley will be appearing on CNN International's World Business Today later Thursday.
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