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Start-up British brokers get lift from market volatility
[LONDON] A surge in market volatility is encouraging a new generation of stockbrokers and traders to set up shop in London, Europe's biggest financial centre.
Stock exchanges and investment banks are signalling a rebound in equities trading volumes, leading more brokers to push into UK and European shares despite tough competition and wafer-thin commissions.
Stock market operator Euronext reported higher profits on Thursday as trading volumes increased. Volatility was fuelled by worries over Greece, China and the prospect of a US interest rate increase all rise soon.
London remains the hub of choice, newly formed stockbrokers said. It is the site of Europe's biggest stock market, and Britain's economic recovery has outpaced the growth in many of its European peers.
Data from the Financial Conduct Authority (FCA) regulator showed that some 40 new securities and futures companies had been approved by the FCA for business so far in 2015. In 2014, 151 won approval.
European low-cost stockbroker DEGIRO had stopped trading Greek shares, as Athens grapples with its debt crisis, but instead began a British trading operations in June.
"Any large move in the market is good for a broker, so it is never that bad for us when the market is volatile," said DEGIRO director Gijs Nagel, echoing similar comments made by Thames Capital Markets' senior trader Gerren O'Neill.
Jennyfer Stanley, a partner at the consulting firm Crossbridge, said although the pace at which new brokers had opened had slowed from, the numbers showed companies continued to see a niche for themselves in the UK.
"There is still a lot of demand out there for new brokers and trading firms to be set up," said James Helliwell, director at a trading academy set up by former Goldman Sachs banker and hedge fund manager Lex Van Dam.
Ms Stanley said increasing regulation was causing some brokers to merge to cut costs. Panmure Gordon said last month, for example, it would buy Charles Stanley Securities last month.
Many brokers left behind by such consolidation are setting up their own companies, said Alan Green, who founded share-dealing firm TradersOwn in 2010 and expected more new brokerages to be set up.
The fact that people can now trade by clicking on a mobile phone has put pressure on the amount brokers can charge for services. But it created opportunities for as well, including mobile gaming and trading application company 'invstr'.
Executives at recently established firms Thames Capital Markets, Charles Hanover Investments and Horizon Stockbroking said even if commissions were being cut, they could still make money by offering wealth-management services alongside their main share-dealing business.
"Yes, margins are being squeezed, but there will always be room for good advice and discretionary trading," said Horizon Stockbroking director Kyri Kangellaris.