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Freeserve's trading bet could be risky

Depending on who you ask, Freeserve is either helping people invest or opening a new gambling joint.
Written by Jane Wakefield, Contributor

Freeserve's announcement to offer trading on the Net met with mixed response from analysts Tuesday: the move by the UK's best known Internet business could empower users at the expense of traditional high street banks, but may be viewed as little more than online gambling.

Gartner group analyst Alexander Drobik, thinks the future of cyber trading is a positive step for consumers willing to take a risk. "It is moving towards the American model where individuals can participate more in investments," he said. As well as opening the stock market to all, Drobik believes companies like Freeserve and E-Trade will pose an increasingly significant threat to traditional financial institutions. "There is no reason why Freeserve could not offer a banking service," he said. "The banks should be very worried about this cherry-picking. They have new competitors who are dancing more quickly."

But Stefan Elmer, analyst with research firm International Data Corporation (IDC), believes the edges between electronic trading and gambling are becoming blurred and warns that consumers are at risk. "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," he said.

While Freeserve accepts there are pitfalls in cyber trading, a company spokesman was keen to highlight the firm's responsible attitude. "Shares can go down as well as up and we advise people to experience paper trading before getting into online trading," he said, although no details were offered. Asked if it was just another version of gambling he claimed "it was not Freeserve's place to comment".

Dixons' recently-floated free ISP has formed a partnership with GlobalNet Financial.com, First Marathon and Mesirow Financial to offer Freeserve customers the chance to trade online. No details of how the trading will be done or cost are yet available and the venture is still subject to regulatory approval. Freeserve hopes to have the service, which will be an extension of its money channel, UK-Invest.com, up and running by April 2000. Traffic to the investing site has increased by 533 percent in three months, according to the ISP.

Enthusiasm for electronic dealing was dampened last month when day trading firm All-Tech Investment Group became embroiled in the Atlanta shootings which claimed nine lives. Day trader Mark Barton opened fire at two day trading companies after financial losses of $20,000 (£12,200).

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