Patrick J O’ Brien, Exante’s Communications Director reports on a boom which is sweeping through the financial sphere.
There is little doubt that the online economy is booming, Malta has joined its European counterparts in this revolution spending at least €50 million online every year. The Internet is creating a new paradigm in retailing, reinventing new business models, and forever changing the ways companies conduct their business. By making an immense amount of information and data readily available, the Internet has provided consumers with the ability to access and navigate in this smorgasbord. Since its inception, the Internet has transformed from merely an information space to a marketplace, adding online execution and transaction capabilities this re-investing online investing.
New industry rules in 2014 have inadvertently encouraged more people to invest on their own, since they may not like the idea of making upfront payments for financial advice. Meanwhile the self-directed brokerage market continues to evolve as investors increasingly opt for greater control over their investments.
The introduction of negotiated commissions in the U.S. in 1975 (eventually followed by most other markets in the world) marked the beginning of constantly increasing competition and challenges for brokers. In the last 16 years, this process accelerated creating capital markets experiencing a revolution driven by technology and radical change in market structure.
Electronic trading dramatically increased trading volumes and liquidity and slashed the cost of intermediation and broadened access to markets. Exchange demutualization led to a dilution of the status of exchange member. Access to liquidity was “democratized”. Liquidity became fragmented among exchanges, alternative trading platforms, lit and dark pools and so on. Exchange “specialists” (market-makers) disappeared.
In many ways, brokers and exchanges now compete with each other: brokers may internalize order execution, they may use alternative exchanges or dark pools; established exchanges offer “direct market access” (DMA) and are occupying increasing space in the investment process, both pre-trade and post-trade.
A lot of people have decided to make decisions themselves when it comes to their finances and the beauty of an online broker is they can do it in their own time and in their own space; all the tools are there. Online brokers are now the preferred trading method for almost half of EU shareholders. Whether it is a transaction over the internet or via a phone, about half of investors use online brokers as their main method of trading and this trend is continuing into 2016.