Question
There is enormous variation in the charges for buying shares to put in an isa. x-o.co.uk can do it for only £5.95 per trade and nothing for the ISA wrapper. The Share Centre charge 1% (so £102 for a maxi ISA) plus £10 pa for the ISA.
My question is: will I get as good a share price with the super cheap one? There is no point in saving a bit on dealing charges if the share price paid is higher.Answer
Thanks, as although this is an obvious question I don't remember ever remember being asked it before and I've had to do a bit of brain scratching to come up with an answer.
Most companies on the London Stock Exchange main market (i.e. FTSE All Share) are traded electronically using SETS (the Stock Exchange Electronic Trading System), in which all buy and sell orders are matched up on price to execute a trade. So on this basis you should be offered the same prices whichever stockbroker you use. When you trade online a brokers system taps into SETS to get the best price and gives you 15-20 seconds to accept or decline.
Less traded shares, for example most companies listed on the Alternative Investment Market (AiM), are generally traded via a modified version of SETS (called 'SETSqx') in which market makers quote firm prices for these shares (combined with periodic auctions) in order to provide some liquidity, so this works in the similar way as above. Otherwise shares will be traded by the stockbroker getting quotes from a range of market makers for the shares you wish to buy or sell (often with high spreads between buying and selling prices). In the latter instance I guess price could vary between stockbrokers depending on how many market makers they have a relationship with, but I wouldn't generally expect there to be much of a difference between brokers.
Stockbrokers are also obliged to adopt a 'best-execution' policy, which basically means they must try and get you the best price they can given the size of your order and likelihood it'll complete.
In summary: when trading FTSE All Share companies there should be very little/no difference in the price offered by brokers unless the share is very illiquid (i.e. very few buyers/seller/market makers). By the same token you might expect a greater likelihood of variation when trading AiM shares and other less liquid securities, but even then electronic dealing systems should ensure prices are mostly consistent.
So that's the theory. But in practice I've never tried checking this out as I only ever seem to have had one stockbroker dealing account at any point in time. If anyone has anecdotal evidence that either supports or rubbishes my answer, please let me know below...
There is enormous variation in the charges for buying shares to put in an isa. x-o.co.uk can do it for only £5.95 per trade and nothing for the ISA wrapper. The Share Centre charge 1% (so £102 for a maxi ISA) plus £10 pa for the ISA.
My question is: will I get as good a share price with the super cheap one? There is no point in saving a bit on dealing charges if the share price paid is higher.Answer
Thanks, as although this is an obvious question I don't remember ever remember being asked it before and I've had to do a bit of brain scratching to come up with an answer.
Most companies on the London Stock Exchange main market (i.e. FTSE All Share) are traded electronically using SETS (the Stock Exchange Electronic Trading System), in which all buy and sell orders are matched up on price to execute a trade. So on this basis you should be offered the same prices whichever stockbroker you use. When you trade online a brokers system taps into SETS to get the best price and gives you 15-20 seconds to accept or decline.
Less traded shares, for example most companies listed on the Alternative Investment Market (AiM), are generally traded via a modified version of SETS (called 'SETSqx') in which market makers quote firm prices for these shares (combined with periodic auctions) in order to provide some liquidity, so this works in the similar way as above. Otherwise shares will be traded by the stockbroker getting quotes from a range of market makers for the shares you wish to buy or sell (often with high spreads between buying and selling prices). In the latter instance I guess price could vary between stockbrokers depending on how many market makers they have a relationship with, but I wouldn't generally expect there to be much of a difference between brokers.
Stockbrokers are also obliged to adopt a 'best-execution' policy, which basically means they must try and get you the best price they can given the size of your order and likelihood it'll complete.
In summary: when trading FTSE All Share companies there should be very little/no difference in the price offered by brokers unless the share is very illiquid (i.e. very few buyers/seller/market makers). By the same token you might expect a greater likelihood of variation when trading AiM shares and other less liquid securities, but even then electronic dealing systems should ensure prices are mostly consistent.
So that's the theory. But in practice I've never tried checking this out as I only ever seem to have had one stockbroker dealing account at any point in time. If anyone has anecdotal evidence that either supports or rubbishes my answer, please let me know below...
Read this Q and A at http://www.candidmoney.com/questions/question384.aspx
No comments:
Post a Comment