Explanation for Liquidity Shortage in UK equities

hhiusa

Senior member
2,687 139
There are only about a tenth of the equities listed on the London Stock exchange compared to the US exchanges. 3,128 to 30,000+. Additionally, the average liquidity that moves through the UK market as opposed to the US market is abysmally low. I found about 800 socks on the UK market that haven't average trading volume 250,000 and only about 75 and those are valued at more than 10 pounds per share. The people in the UK trade that much less been do you US or do they I'll just want to invest in the US market. I was trying to diversify my portfolio into foreign markets but if there is liquidity issues I really don't see the point.

http://www.londonstockexchange.com/home/homepage.htm

https://www.interactivebrokers.com/en/?f=%2Fen%2Ftrading%2Fexchanges.php%3Fexch%3Dlse%26amp%3Bshowcategories%3DSTK%26amp%3Bib_entity%3Dllc

NYSE 3,282
NYSE AMEX 415
NYSE ARCA 8,098
NASDAQ 2,923
ARCAEDGE 2,152
BYX 8,101
CHX 8,087
IEX
INET (ISLAND)
PINK
DIRECT EDGE

BATS EUROPE 682
CHI-X EUROPE 681
LSE 3,193
 

hhiusa

Senior member
2,687 139
In the UK you have to pay stamp duty = 0.5%

That doesn't explains anything. Why would that deter people? I use interactive brokers and I only have to pay $ 0.0035/Share and I pay less for more liquidity I move so sometimes I even pay as little as $ 0.0005/Share so if I move $5000 dollars in one transaction, say a hundred shares that's the equivalent $ 0.67 Commission including all fees +0.5% times $5000 equals $25. A maximum charge £6 pounds on up to £50,000 trade value. I don't have to make %1.00 in a transaction to make money. That still doesn't explain the extremely low liquidity or extremely low offering of equities. That's better than paying some overpriced brokerage firm £9.95 per trade.
 

hhiusa

Senior member
2,687 139
Do you trade the UK market? What is the reason then?
 

flazedude

Newbie
3 0
I find this particularly interesting as I trade daily on the UK market, and althought there are some profitable trades, but with all the overpriced commission and stamp duty (although it doesn't apply to AIM stocks), the low volume of trades is a problem.

I'm a newbie at trading at best so I might be chatting balls. But by using these day trading techniques, it is incredibly difficult to get a good profit margin even when you found the best entry point and exit points. I'm looking to trade on the US market but right now don't know which broker would allow UK citizen with low commission rates, forgive my ignorance should these information was included amongst other threads.

Cheers.

*Indeed my ignorance got the best of me, I had a look at brokage section of the forum, plenty of information indeed.
 
Last edited:

Jack o'Clubs

Experienced member
1,554 342
There are only about a tenth of the equities listed on the London Stock exchange compared to the US exchanges. 3,128 to 30,000+. Additionally, the average liquidity that moves through the UK market as opposed to the US market is abysmally low. I found about 800 socks on the UK market that haven't average trading volume 250,000 and only about 75 and those are valued at more than 10 pounds per share. The people in the UK trade that much less been do you US or do they I'll just want to invest in the US market. I was trying to diversify my portfolio into foreign markets but if there is liquidity issues I really don't see the point.

If you're trading I don't see the point of diversification, far better to concentrate on the markets / securities you understand very well. If you're investing over a longer term then lower liquidity and slightly higher costs are largely irrelevant so why worry about it. Ultimately the difference in liquidity and volumes is simple economics: your economy is 8x bigger.
 

hhiusa

Senior member
2,687 139
If you're trading I don't see the point of diversification, far better to concentrate on the markets / securities you understand very well. If you're investing over a longer term then lower liquidity and slightly higher costs are largely irrelevant so why worry about it. Ultimately the difference in liquidity and volumes is simple economics: your economy is 8x bigger.

My purpose in diversifying internationally is for tax concerns as it benefits me to do so. The UK has a maximum corporate tax rate 26% and does not double tax dividends. Stamp duty and VAT are nominal compared with paying 39% in the US.
 
 
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