Trading in physical stocks and shares is the oldest and until
quite recently the most widely used method of trading the financial
markets. Whilst the origins of share trading date back to the
12th century it is in the last 200 years that this
form of trading has grown in popularity. Most countries in the
world now have stock exchanges with one of the largest being here
in London. The London Stock Exchange was started in 1801 in a place
called Paternoster Square in the City of London, a site that it has
returned to recently having been previously situated near to the
Bank of England. The LSE is now ranked as the fourth largest stock
exchange by market capitalisation and sixth largest in terms of
trade volumes. An estimated 2.75 billion dollars' worth of trading
passes through the exchange on a daily basis with an increasing
amount of trade now coming from retail investors.
The continued rise in popularity of CFD trading and spread
betting has seen a move by some investors away from traditional
share dealing but nevertheless this area still remains popular with
a generation who are perhaps slightly less familiar and comfortable
with derivative products and the world of leverage and online
trading.
Most companies offering a stock trading service have been in the
City for a long period of time and are very well established and
recognised as offering high levels of service to their
clients. The majority of these companies operate differently
from the CFD and Spread Betting firms in that they offer a more
personalised service where you are allocated an account manager and
place orders via the telephone rather than across an online trading
platform. The costs for dealing this way are invariably higher than
other forms of trading and the full amount of the contract value is
always placed with the stockbroker, in other words they do not
offer leveraged trading. That said there are still a huge number of
retail and professional clients who choose to trade using a stock
broker not least because of the security of dealing with a trusted
and established business and the access clients receive to very
experienced market professionals.
The future growth of trading in stocks and shares in the retail
market will depend largely on how the derivative products such as
CFDs and Spread Bets continue to evolve. At the moment is appears
that the next generation of traders are more likely to embrace the
new world of trading online and across mobile devices rather than
opting for using the services of a traditional stock broker.
That said there does appear to be a number of new firms who have
chosen to offer traditional share dealing but at much reduced
commission levels for an execution only service in an attempt to
compete with the growing number of CFD and spread betting
companies.