Investors demand more

Investors are increasingly using sophisticated techniques and faster pricing to gain returns, with over one in ten (11 per cent) currently using real time Level 2 pricing and a third of investors (33 per cent) using Direct Market Access (DMA), according to research from Barclays Stockbrokers. Both services have only recently been made available widely to private investors.

Whilst not yet a mass market product, the use of Level 2 data is certainly growing fast - according to the London Stock Exchange, there has been a 400% increase in usage in the last 18 months. The average number of trades on the London Stock Exchange’s trading platform during October 2007 was 573,767, up 73% on October 2006.

Level 1 pricing enables investors to see the bid, offer and the day’s high and low prices of specific stocks in real time, versus delayed pricing information which is traditionally used by retail brokers. Level 2 is a more recent phenomenon and allows investors to view the order book; the actual buy and sell orders for each share in the market as they are entered, amended and executed in real time. This in turn shows what is known as ‘market depth’ – the buying and selling interest for a particular share. DMA enables investors to react to this market depth, enabling private investors to place a buy or sell orders directly on the London Stock Exchange’s order book.

Stephen Grady, Head of Global Dealing, Barclays Wealth says: "We expect to see fast evolution in this market over the next few years. Investors are increasingly demanding quicker, transparent and more sophisticated techniques to access the markets. We have seen a real shift in recent years in terms of the techniques and products that our clients are using to gain returns. We are in continuous dialogue with our client base which enables us to shape our platform according to their demands as they become increasingly sophisticated."

Barclays Stockbrokers offers access to Level 1 and 2 Equity trading through its BARX platform. BARX gives investors the ability to trade quickly and capitalise on multiple opportunities in the markets – across a range of products from the same platform.
Martin Graham, Director of Markets at the London Stock Exchange commented: “There has been a huge expansion in trading volumes on our order books recently, with the total number of trades per day now running at an average of 573,767, an increase of more than 70 per cent on the same period last year. Private investors are able to gain a complete picture of the vast liquidity pool which generates these trades through Level 2 data and use this information to inform the pricing and timing of their trades. Using Direct Market Access (DMA) private investors can go one step further and access this liquidity directly, just like market professionals.”