Equity dealing services pave way for market automation

Investors will benefit from increased competition in the equities dealing markets triggered by the establishment of the Tradepoint order-driven market and the Sharelink Internet service, says a leading financial services solicitor.

David Lough, Cripps Harries Hall partner and chair of the Association of Solicitor Investment Managers (Asim), said the launch of both services could be the start of further moves to automation, bringing down the costs of transactions.

Solicitor investment managers will continue to need other services such as research and advice currently given by brokers and so their use of the Internet service as currently intended would be limited.

Lough said: “I think the more significant development is Tradepoint because it is the first order-driven market for shares. So far, we have had a quote-driven system, where you pay the costs of the dealers in the middle.

“It is probably the start of a computer order-match market, bringing dealing costs down perhaps at the expense of liquidity in the marketplace.”

Sharelink launched its Sharelink New Issues Placing Service (Snips) last week, enabling private investors to receive data on and participate in new issues which come to market through a placing.

Head of investor services Emma Kane said: “Snips is for private investors but we hope to bring out a version in the near future for professional investors, lawyers and other people dealing with client money.”

She added: “We act for more than 1,200 intermediaries, so we have a big market already.”

From 1 January 1996 the Stock Exchange listing rules will change to allow an issuing company to “bring securities to listing by whatever method it and its advisers select”.

Making shares available directly to private investors will no longer be a requirement and concerns exist that this will result in their exclusion from many new issues, warned Sharelink. It said the Snips service will help correct this risk.

Meanwhile, the Stock Exchange announced that, as from last week, it has changed its 'best price' rule (Rule 4.18) to remove any barrier to a member firm quoting prices on another recognised investment exchange or similar system.

This rule had been seen as a major sticking point in the establishment of Tradepoint.