Question
Please can you explain how the LSE's International Retail Service operates and how I can access it?Answer
The London Stock Exchange International Retail Service (IRS) provides access to around 350 large European and North American stocks as if they were listed on the London Stock Exchange. This means low cost UK dealing charges via stockbrokers and not having to mess around with buying stocks in foreign currencies, as they're traded in pounds sterling. Plus, any dividends are paid in pounds.
Of course, there'll still be currency risk (due to exchange rate movements) and foreign exchange costs, but the latter are absorbed into a share's bid/offer spread (difference between buying and selling price). Because it's a small market you might also expect slightly wider bid/offer spreads than if you purchased the same shares on their domestic markets, although I'd expect the difference to usually be minimal.
Most stock brokers offer access to IRS so using the service should be very straightforward - the same as buying a UK share. But as the companies listed on IRS are domiciled overseas you shouldn't have to pay any stamp duty when buying their shares.
Behind the scenes trading logistics are handled by the CREST settlement system, much like buying UK shares.
However, there's a difference as you don't physically own the shares themselves. CREST buys them and holds them in large 'pool' accounts in the countries where they're listed. You're (or more accurately, your stockbroker) is then given a CREST Depository Interest (CDI) - basically an electronic piece of paper that says you (technically your stockbroker's nominee account) have beneficial ownership of the shares.
Is this safe? Well not as safe as owning a physical share certificate, but probably safer than holding shares via a stockbroker nominee account which is the norm these days (and how you'd invariably hold the CDI's anyway).
Perhaps the only other thing to consider is trading times. You can only buy and sell IRS shares while the London Stock Exchange is open, which means periods of time when you can't trade the shares even though the underlying stock markets are open. For example, US shares traded on IRS can only be traded for a few hours in the afternoon. This might be a problem if you want to trade during periods of high volatility.
In summary, IRS is a good thing and makes trading in certain large foreign companies very straightforward. I can't think of a significant reason not to use it unless you plan to trade very actively, in which case limited trading times and wider bid offer spreads potentially reduce the appeal.
Please can you explain how the LSE's International Retail Service operates and how I can access it?Answer
The London Stock Exchange International Retail Service (IRS) provides access to around 350 large European and North American stocks as if they were listed on the London Stock Exchange. This means low cost UK dealing charges via stockbrokers and not having to mess around with buying stocks in foreign currencies, as they're traded in pounds sterling. Plus, any dividends are paid in pounds.
Of course, there'll still be currency risk (due to exchange rate movements) and foreign exchange costs, but the latter are absorbed into a share's bid/offer spread (difference between buying and selling price). Because it's a small market you might also expect slightly wider bid/offer spreads than if you purchased the same shares on their domestic markets, although I'd expect the difference to usually be minimal.
Most stock brokers offer access to IRS so using the service should be very straightforward - the same as buying a UK share. But as the companies listed on IRS are domiciled overseas you shouldn't have to pay any stamp duty when buying their shares.
Behind the scenes trading logistics are handled by the CREST settlement system, much like buying UK shares.
However, there's a difference as you don't physically own the shares themselves. CREST buys them and holds them in large 'pool' accounts in the countries where they're listed. You're (or more accurately, your stockbroker) is then given a CREST Depository Interest (CDI) - basically an electronic piece of paper that says you (technically your stockbroker's nominee account) have beneficial ownership of the shares.
Is this safe? Well not as safe as owning a physical share certificate, but probably safer than holding shares via a stockbroker nominee account which is the norm these days (and how you'd invariably hold the CDI's anyway).
Perhaps the only other thing to consider is trading times. You can only buy and sell IRS shares while the London Stock Exchange is open, which means periods of time when you can't trade the shares even though the underlying stock markets are open. For example, US shares traded on IRS can only be traded for a few hours in the afternoon. This might be a problem if you want to trade during periods of high volatility.
In summary, IRS is a good thing and makes trading in certain large foreign companies very straightforward. I can't think of a significant reason not to use it unless you plan to trade very actively, in which case limited trading times and wider bid offer spreads potentially reduce the appeal.
Read this Q and A at http://www.candidmoney.com/questions/question558.aspx
Hello,
ReplyDeleteAnd do you know how I can access it? ie, could I see a list of the supported stocks on the London Exchange if I don't have a broker account yet?
Thanks!
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