1 September, 1999

New trading service revives gambling debate

by Will Knight

A new online trading service launched in the UK today by Wall Street company Donaldson, Lufkin & Jentrette (DLJ) has sparked renewed debate as to whether this will lead to a boom in online gambling

The trading service launched by DLJ places no lower limit on investments and charges only minimal commission, making it ideal for small-scale, part-time investors.

A number of Internet trading facilities already exist in the UK. The most prominent services are provided by Barclays , E-Trader and Schwabb.

When Freeserve announced plans to launch an online trading service in the UK in April of next year, one analyst expressed fears that the line between gambling and trading was beginning to blur.

Stefan Elmer, analyst with International Data Corporation Research (IDC) warned, "Trading should be left to the professionals. It is dangerous for [non-professional] consumers to have the possibility to trade online. The difference between casinos and online trading companies is decreasing."

Today Elmer reiterated that warning and also expressed fears that online-trading could help popularise online gambling saying, "In European countries where online gambling is illegal, online trading is undoubtedly putting pressure on governments to relax those laws."

However, head of financial research with Mintel, Lance Close, disagrees that online trading will ever be a substitute for established gambling. "In a sense it is gambling," he says. "But I think there will remain distinct differences between online trading and going to the betting shop. Conventional gambling is much more immediate and high-risk. People might perceive this as betting, but I don't think it will take money away from the gambling industry."

Another financial researcher, Jay Marathe, at Durlacher Research Ltd, agrees that it is probably a mistake to see online trading in the same way as betting on a horse. He says, "I think we will see a different demographic of people involved in online trading to online gambling. It will not appeal to the same people, so it is not really fair to say it is comparable to gambling."

Marathe admits that the growth of Internet trading in the UK is likely to bring with it significant changes in investment habits. He adds, "In the US, online traders have been found to invest much more frequently and there is also more day-trading and margin [borrowed money] trading."


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