This has appeared here before but I can't find it. Today MEPs voted to outlaw execution only trading. Investors will be required to seek advice before every transaction is the way that financial journalists have interpreted it! The article below was written a couple od days ago and the motion has now been passed as I understand it.
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Execution-only deals under threat
Execution-only share dealing could be under threat from a new directive due to go before the European Parliament on Tuesday.
The cheap and cheerful execution-only service means customers don't pay for advice but can buy or sell for as little as £10.
Available over the phone or online, it has opened up the stock market to many people who might otherwise have balked at the high cost of transactions.
But the Investment Services Directive would require stockbrokers to run suitablility checks on all investments by clients, to assess their knowledge and experience.
Forced to pay
This would apply even to those who don't want advice, just an execution service.
Critics say this could increase the cost of a trade to £100.
People would be forced to pay for advice they did not want and many would find themselves priced out of investing in shares.
The directive goes before the European Parliament's economic and monetary committee on Tuesday, then the full Parliament at the end of September and finally the Council of Ministers.
If the measure is voted through, many execution-only brokers might close down.
ProShare, which represents small investors, says two-thirds of trades using market brokers are currently execution-only.
It says the system offers a valuable and efficient way for small investors to trade.
Fully responsible
"There is little evidence from the UK experience of execution-only dealing that investors using these services do not understand that they are fully responsible for their own decisions," ProShare told the European Parliament in its submission.
"Other than account-opening checks, we do not see the need for a suitability test."
MEP Theresa Villiers is one of those leading opposition to the plan.
"This is just nanny state-ism," she argues.
We don't want to cut out the choice that already exists for investors.
Diane Hay, Proshare
"There is no reason why investors shouldn't, if they want to, be able to make their own decision.
"There are a lot of very well informed, very expert people out there who are quite happy to take their own decisions and if they do that the cost of buying and selling sharses could be as much as 20 times cheaper than when they go to a broker and get advice."
Diane Hay, chief executive of ProShare, hopes there will be an exemption on the relevant clause.
"There will be changes as a result of this," she says. "We're not going to see things carry on exactly as before.
Lobbying
"But what we don't want to see are suitability tests every time any investor wants to trade shares.
"There are good things here but we don't want to cut out the choice that already exists for investors and is so important to the UK market."
The UK investment industry has been lobbying against the proposal, joined by countries such as Germany, which has a strong execution-only sector.
"We think this is too much legislation which isn't going to act in the client's interest because it's going to put up charges enormously," says Hilary Cook of Barclays Private Clients.
However, some European goverments are thought to be keen to impose suitability checks on would-be investors.
***********************************
Execution-only deals under threat
Execution-only share dealing could be under threat from a new directive due to go before the European Parliament on Tuesday.
The cheap and cheerful execution-only service means customers don't pay for advice but can buy or sell for as little as £10.
Available over the phone or online, it has opened up the stock market to many people who might otherwise have balked at the high cost of transactions.
But the Investment Services Directive would require stockbrokers to run suitablility checks on all investments by clients, to assess their knowledge and experience.
Forced to pay
This would apply even to those who don't want advice, just an execution service.
Critics say this could increase the cost of a trade to £100.
People would be forced to pay for advice they did not want and many would find themselves priced out of investing in shares.
The directive goes before the European Parliament's economic and monetary committee on Tuesday, then the full Parliament at the end of September and finally the Council of Ministers.
If the measure is voted through, many execution-only brokers might close down.
ProShare, which represents small investors, says two-thirds of trades using market brokers are currently execution-only.
It says the system offers a valuable and efficient way for small investors to trade.
Fully responsible
"There is little evidence from the UK experience of execution-only dealing that investors using these services do not understand that they are fully responsible for their own decisions," ProShare told the European Parliament in its submission.
"Other than account-opening checks, we do not see the need for a suitability test."
MEP Theresa Villiers is one of those leading opposition to the plan.
"This is just nanny state-ism," she argues.
We don't want to cut out the choice that already exists for investors.
Diane Hay, Proshare
"There is no reason why investors shouldn't, if they want to, be able to make their own decision.
"There are a lot of very well informed, very expert people out there who are quite happy to take their own decisions and if they do that the cost of buying and selling sharses could be as much as 20 times cheaper than when they go to a broker and get advice."
Diane Hay, chief executive of ProShare, hopes there will be an exemption on the relevant clause.
"There will be changes as a result of this," she says. "We're not going to see things carry on exactly as before.
Lobbying
"But what we don't want to see are suitability tests every time any investor wants to trade shares.
"There are good things here but we don't want to cut out the choice that already exists for investors and is so important to the UK market."
The UK investment industry has been lobbying against the proposal, joined by countries such as Germany, which has a strong execution-only sector.
"We think this is too much legislation which isn't going to act in the client's interest because it's going to put up charges enormously," says Hilary Cook of Barclays Private Clients.
However, some European goverments are thought to be keen to impose suitability checks on would-be investors.
