How shares are traded

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4. Choosing an execution-only broker

If you are choosing an execution-only broker, the issues are slightly different.

Your check list should cover the items below. If you don't understand the significance of some of them don't worry - they are discussed further on.

1. Account
   • What is the minimum initial deposit to open an account?
   • Is there a minimum account balance?
   • How much interest do you get on positive account balances?
   • Are margin accounts permitted, and if so what are the rates?
   • What online reports are available (account balance, portfolio summary, transaction summary)?
   • Are there detailed statements and can they be posted to you?
   • Is the account protected/insured?
   • By what methods do you transfer money to and from the account?

2. Trading
   • Which markets do they cover (just FT All Share or AIM as well?)
   • Do they deal in warrants, options, futures, bonds, ITs, or just shares?
   • Do they use straight-through processing or is execution email-based?
   • Do they accept limit orders or does it have to be 'at best'?
   • Is the service nominee based, sponsored CREST membership or fully certificated?
   • Will you receive reports and accounts and shareholder perks?
   • Are real-time prices offered for all stocks (including AIM)?
   • Can you get free news, analysis and portfolio management tools?
   • Does the site display normal market size (NMS)?
   • Does the site tell you when a share goes ex-dividend?

3. Charges
   • Are there any initial set-up costs?
   • Do they use a flat commission rate or one based on a percentage of deal size?
   • Is there a minimum charge?
   • Is there a minimum dealing size?
   • What are the costs associated with moving the account?
   • Are there premium services which you have to pay for?
   • Is there a discount for trading frequently?
   • Do they charge for a consolidate tax certificate at the end of the year?
   • Do charges vary according to how you place your order (by phone or online)?

4. Settlement
   • Can you receive share certificates, or is it all nominee based?
   • What is the settlement period?
   • Do they offer sponsored membership to Crest?
   • Can you opt to have dividends automatically reinvested in the same company?
   • Can dividends be automatically paid to you by cheque or into your bank account?

5. Extra services
   • Do they offer share ISAs online?
   • Do they deal in investment trust shares and if so, does the site show discount to NAV?

6. Other factors
   • How can you contact them? (email, web, fax, telephone)
   • Can you deal out of hours?
   • Are telephone calls free, at local rates or at national rates?
   • Is the service compatible with all computers and browsers including Netscape and Macintosh?

7. and lastly
   • Are they a well known firm with a good reputation?

1. The role of brokers 2. What type of broker do you want? 3. Choosing a discretionary or advisory broker 4. Choosing an execution-only broker 5. Opening an account with a broker 6. Placing buy/sell orders by telephone 7. Placing buy/sell orders online 8. Normal market size 9. The spread 10. Contract notes 11. Settlement 12. Conclusion

• First Steps in Shares
• "Investors Chronicle" Beginners' Guide to Investment