Tuesday, 14 December 2010

Why you should not trade in the UK.

I started off trading on UK stocks some years ago. Within the first year I discovered that any private investor thinking of trading in the UK is at a large dis-advantage compared to institutional investors.

I try and limit my activities to the US for the following reasons

  • Prices for stocks are free and Level 2 is cheap. (Here the London Stock Exchange only provides prices on a 20min delay and wants to charge extortionate fees for real time and level 2 data). Unbelievable and completely backward !
  • If I create liquidity both sides of the trade I actually receive money back for trading in the US. That’s right if I buy and sell BAC at say 11.13 and create liquidity on each side I make money, even after commission.
  • Information in the UK is expensive and there is no central place for data, compare that to the SEC filings – perfect standard data across all companies
  • Information on options, short interest is not easily available in the UK. Compare that to Nasdaq where all financial data is available
  • The US has better quarterly reporting regime, giving you 4 chances a year to get it right !
  • You cannot day trade in the UK the commission costs are far too high.
  • Its easy to get access to the NYSE floor brokers, which means you get filled before the price rolls through a level. So you can ‘parity trade’
  • The US markets are far more liquid, mainly because their exchanges are very forward thinking. Compare that to the London Stock Exchange dinasour that we have here, where systems go down on critical days and price information is a commodity.

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About Me

I try and work a broadly market neutral strategy and based purely on fundamentals and my gut feel.