E*Trade is setting up a joint venture with Cambridge, UK-based Electronic Share Information (ESI) to address the European internet stockbroking market. Palo Alto, California-based E*Trade is to set up a UK subsidiary, E*Trade UK, which will be Europe’s first fully online stock trading system. Earlier this month, E*Trade set up a Japanese subsidiary through a […]
E*Trade is setting up a joint venture with Cambridge, UK-based Electronic Share Information (ESI) to address the European internet stockbroking market. Palo Alto, California-based E*Trade is to set up a UK subsidiary, E*Trade UK, which will be Europe’s first fully online stock trading system. Earlier this month, E*Trade set up a Japanese subsidiary through a joint venture with Softbank, the Japanese software publishing group. In May 1998, E*Trade agreed to provide online investing services to US subscribers to WebTV Networks’ TV-based internet service. Founded in 1992, E*Trade is the leading US online brokerage and currently has a Nasdaq market capitalization of $918m. In addition to its own web site, E*Trade is available in the US via CompuServe, Microsoft Investor and AOL. E*Trade is to invest $6.4m for a 27.7% stake in E*Trade UK which will be capitalized at $23m. Hermann Hauser, the Cambridge-based venture capitalist who founded ESI in 1995 and is its majority shareholder , will hold under 50% of E*Trade UK’s equity. Like other US brokers such as Charles Schwab, E*Trade sees the UK with its highly-developed equities market as the stepping stone to launching internet share dealing services in continental Europe. E*Trade UK plans to be the first purely web-based stockbroker in the UK, stealing a march on competitors which are developing online execution-only dealing as an adjunct to their existing offline broking services. Its internet service will handle all aspects of the share dealing cycle, allowing investors to buy and sell shares electronically and the resulting transactions to be executed, cleared and settled without human intervention. Investors will also be able to trade using touchtone phones and voice recognition technology from Boston, Massachusetts-based Applied Language Technologies. Julian Costley, chief executive of both ESI and E*Trade UK, says that the new company is unlikely to offer paper share certificates, the traditional method by which private UK investors record their holdings. Instead, shares will be placed in nominee accounts and registered in an individual investor’s name on the London Stock Exchange’s CREST electronic share certification system. Mr Costley says that CREST retains all the advantages of paper share certificates, such as voting rights, dividends and perks, but with the bonus of a much faster execution time for transactions. There is an enormous, very valuable group of private investors in the UK which is attuned to the internet and computers and will be attracted by the prospect of all-electronic trading, Mr Costley claims. ESI has already signed up 175,000 customers in the UK and is growing by 9,000 a month. The basic package offers LSE share prices after a 20-minute delay, but for 20 pounds a month, users can receive prices in real time. ESI also provides analytical software and equity market information from 10 providers including the LSE’s Regulatory News Service, the AFX real-time wire service and forecasts from Edinburgh Financial Publishing.