MEPs vote to outlaw Execution only trading.


Established member
752 6
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.

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.


"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.


8,659 984
Does anyone know how this will impact companies such as IB ? I would have thought that it will just require more form filling in saying that you understand what you are doing.

One thing is for certain and that is it will kill daytrading in the UK if it prevents direct access trading in my view. One option is to register an address in the US which is something I have been looking at ever since this lunatic Nanny state we live in started this pathetic "No-one is accountable for their actions" mentality that we now seem to be faced with.

I have to say that I have grown to hate the EU and everything is stands for.



Experienced member
1,040 118
This action seems to suggest that using a Broker for advice is a good thing. What a joke. Most of the ones I know through friends don't even use TA.
This all smacks of 'jobs for the boys' to me.
..and what will it do to liquidity ?

If they pass this law, then they should pass another which only allows Brokers with a successful track record to give advice.
And while they're at it, they can have a crack at all the Fund and Pension managers and newspaper pundits who managed to lose huge amounts for their clients.



8,659 984
I have sent a very acidic email to my MEP and I have also asked IB how it will impact their subscribers. I will post the answers when I get them.



Established member
752 6
I bet most MEPs have never bought a share in their lives - either exec only or thru a stockbroker. They don't need to. With huge salaries, expense claims and very generous final salary pensions (which politicians have destroyed for the rest of us) this smacks of "I'm alright jack - pull the ladder up".

And these "experts" are presumably the same experts who marketed technology funds in the spring of 2000, and who urged us to sell our old economy banking and tobacco shares to embrace the new economy. As there aren't enough experts around to manage the funds that are currently available, where on earth are they to come from? Step forward spotty youth - yesterday you couldn't even spell stockbroker and now you are one!


Established member
552 3
Is anybody else seeing 4 large ftse charts on this thread??

Also having problems logging on.


Experienced member
1,040 118
Pray tell, where did you see the confirmation that they had passed the law ?


Junior member
17 0
Following on from RogerM's comment's, I wouldn't be at all surprised if some of the drivers of the bill had taken a caning in the last year or two and are now exacting their revenge on those deemed responsible.

Just my tuppence.



Experienced member
1,329 11
You just click on his link to the economic and monetary committee,then meetings (2/9/03) and agenda.There's only 1 meeting scheduled for today.I tried to reach the economic and monetary committee direct but 'the site has been redesigned' and jonathans way seemed easier. You're right though,it doesn't tell you much.

Mr. Charts

Legendary member
7,370 1,194
Trading the US direct access is my living.
If these muppets get their way then I shall simply have to buy a place in the US


Senior member
2,560 22
Agreed the Euro MPs and EU are all muppets.

It looks to me that they will be pushing every trader to Futures, CFDs and Spreadbets thus reducing liquidity in the share market.

That's just what the economy needs.

I think the Tories might well have a referendum in their manifesto to leave the EU with a bit of luck.

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