PALO ALTO, CA – E*Trade, the US online stockbroker, last month launched a joint venture with Electronic Share Information (ESI) to build the UK's first fully electronic brokerage business.
ESI is British venture capitalist Hermann Hauser's online data service company that provides online stocks and shares data on an “anytime and anywhere” basis. It has a database with the names of 170,000 British investors.
ESI was voted “The Best Internet Sit in 1997” by the Wall Street Journal Europe and won the British Telecom/Sunday Times Superhighway Award for “The Best Internet Site in 1996.”
The new company, E*Trade UK, should be up and running by the end of the year when the company will have sorted out the UK's stringent trading regulations. The service will be available in the UK, Ireland and the Channel Islands.
Although it is possible to buy shares via the Web in Britain, human intervention is still required, even on Internet orders. Also, dealing is usually offered in addition to other services rather than as a service in its own right.
“The service is going to give the British private investor what he or she wants,” said Tami Bourke, head of marketing and communications for E*Trade UK.
“British private investors are much more technologically aware than even a year ago. We've had nothing but interest in the service.
“But we've got to make sure it's absolutely perfect and that investors are properly protected and we can't have systems that are going to go down.”
Bourke said that the company will market the service in much the same way it's been done in the US, “although there are likely to be slightly different nuances. Britons have a different sense of humor, a different attitude and style.”
Skeptics have wondered if E*Trade UK will take off in Britain which does not have much culture of individual trading. At the end of last year, the US brokerage firm, Fidelity, withdrew because of lack of interest.
However, E*Trade UK says that only one ESI customer canceled his subscription upon hearing the plans.
Some aspects of British stock trading are antiquated and are likely to limit E*Trade UK's reach. For example, most private investors own paper certificates.
E*Trade is not going to address these issues, and will only offer Internet and automated telephone brokerage for shares held in a nominee account, where the shareholder receives no share certificate.
“We are conscious of the fact that we are cutting off quite a bit of the market by saying nominee only, but in the future we will carve out a big market share,” said Julian Costley, chief executive of ESI and of the new company.
“But our joint venture with E*Trade represents a milestone for the UK private investor.
“I am certain that just like US investors, investors here who want to take control of their financial decisions will be attracted to the access the E*Trade model provides to financial markets, investment research, news, market analysis and powerful portfolio management tools,” he added.
“Our combined expertise,” said Christos Cotsakos, president of E*Trade, “will surely provide the company with a competitive advantage as the European marketplace continues to evolve.”
E*Trade's expansion plans, however, are not limited to the UK. The company is in the process of building a global brand. In May it disclosed plans to form a joint venture in Japan with Softbank Cork to establish an E*Trade there.
It is also expanding in Germany, Israel and Australia and is planning to launch a Central Europe service, which would encompass Croatia, the Czech Republic, Hungary and Poland.