Online brokerage hopes to bring US trading boom to UK

One of America’s biggest Internet success stories, the E*Trade online investment service, will make its UK debut tomorrow.

Hot on the heels of the launch of a home grown Internet dealing service from UK bank Halifax, Etrade is kicking off with an aggressive campaign to attract the lion’s share of a potential customer base it estimates to be as many as 150,000 investors.

Etrade UK is a joint venture formed a year ago between its US parent, the Etrade Group, and the UK based Electronic Share Information service.

The Etrade Group has embarked on a strategy of global expansion and has already rolled out services in Canada, Australia, France and the Nordic region.

Etrade will be this country’s first Internet only brokerage and will be open to investors with a minimum of £1,000 and a UK bank account.

Rather than basing its commission on a percentage of sale, it will offer flat rate trades of between £14.95 and £24.95, based on the size of the deal and the frequency with which the customer uses its service.

It also plans to pay “competitive interest” on customers’ account balances.

Etrade chief executive in the UK, Julian Costley, said the service would be targeted at investors wanting quick trading without individual market advice.

Market research by the company has shown that at least 150,000 of the UK’s four million share owners were in the market to use an online brokerage and Etrade hopes to become one of the top three players in this sector within the year.

In the US, the company has 1.2 million accounts and is attracting new customers at the rate of 320,000 a quarter.

While its up to the minute infrastructure and lack of bricks and mortar will keep its overhead below that of conventional brokerages, Etrade UK expects to pour investment into marketing and systems development.

Costley said E*Trade needed to focus on building market share while the market was still in its infancy.

“We do not expect to be profitable for quite some time - it really isn’t the point,” he said. “I would be quite comfortable if we didn’t make money for five years."

“Customer support is a major factor for reducing churn on accounts and that costs money,” he added.

Etrade will also look to form partnerships with big brand banks and building societies and claims to have a number of deals in the offing. Etrade has conducted a 50 account systems pilot for the past two months, following its registration by the London Stock Exchange on 17 May.

Etrade UK is based in Cambridge and has a staff of 50.

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