BusinessWeek Investor: Online Investing
Need an E-Broker? It's a Buyer's Market (int'l edition)
Europe's 50 online brokers are vying for clients
When Pierre Chavy, an investment consultant at French technology fund it Asset Management, went shopping for an Internet broker last year, he chose Fimatex, a subsidiary of Societe Generale. That was partly inertia: 67-year-old Chavy has been a Soc Gen client for 50 years. But he also had some specific needs. At the time, Chavy was looking to buy shares of jds Uniphase, listed on Nasdaq; Nortel, listed on the New York and Toronto exchanges; and Nokia, listed in Helsinki, Paris, and other European markets. "I wanted an account with good access to these markets," he says. Fimatex (www.fimatex.fr) has direct links to the U.S. exchanges and eight stock markets in Europe.
For Dennis Sheehan, chief financial officer for international operations at General Motors Acceptance Corp., execution of trades was the issue. Sheehan was transferred from Minneapolis to London last December. He still uses his online account at Charles Schwab in the U.S. But within the year, he expects to add a European e-broker. "In Europe, there is a relatively wide bid-offer spread," Sheehan says. "I want a broker here who can buy a security at the best price."
If you're an executive on the go in Europe and thinking of going online to get your stock trading done, that's a fine idea. You can expect all the advantages of e-brokering anywhere. But, as Chavy and Sheehan illustrate, you have some decisions to make before choosing among Europe's 50 e-brokers: Where do you want to invest? What are your priorities--a good introductory package, price, analysis, or reach?
It's a buyers' market. At Comdirect (www.Comdirect.de), Europe's market leader based in Quickborn, a suburb of Hamburg, open a new account for $24 and you get a Deutsche Telekom share, currently worth $97; a half-year suspension of monthly account fees; free access for six months to Internet service provider T-Online; and a weekly magazine, Borse Online, for 12 weeks. That package helped Comdirect double its customer base last year, to 272,000 accounts.COSTLY TRAPS. E-brokers have various strategies for trading across borders. Some, such as Bourse Direct in Paris (www.boursedirect.com), offer little service outside their own markets. Comdirect uses its large parent, Commerzbank, to execute across frontiers--and charges double for such trades. Many others relay foreign orders to local brokerages.
Nuremberg's ConSors Discount-Broker (www.consors.de) is among the first e-brokers with a European strategy. It has acquired e-brokers in Paris and Madrid and started one in Zurich. U.S. brokers are jumping in, too. In Britain, Charles Schwab Europe lures customers with a month's free trading. DLJ Direct is in London, as well. But E*Trade, with partners in Britain, France, and Sweden, has a Europewide strategy.
So you may need to trade through more than one broker. Indeed, the opportunities for cross-border trading through a single broker may disappoint you: They're not what they should be--not yet, anyway. There are often complex questions about taxes to consider, too. Trade in French shares via a local broker, and you may find yourself arguing with the local tax authorities about your liabilities. In general, investors considering opening an account outside their own country should consult a tax specialist to avoid costly traps.
With Europeans trading online in unexpected numbers, there are growing pains. Investors often face long waits before they can execute their trades. At Comdirect, a software glitch disrupted trading for two days in February. Still, e-trading is light years away from the old brokering tradition, which held unchallenged sway only five years ago. "Back then you needed a minimum of $100,000 to open an account," recalls Vincent Taupin, managing director of Fimatex. "You can open an account with us for 150 euros." As Europe's equity culture spreads and securities laws harmonize, e-brokers will make the most of such advantages.By Sharon ReierReturn to top