Welcome to the UK Stockbroker bulletin provided by Financial Expert, where we dive into the ever-changing world of the UK stockbroker industry. As investors and market enthusiasts, staying up-to-date with the latest news and events is essential for making informed decisions. In this edition, we’ll explore the most recent developments that have been shaping the landscape of stockbroking in the United Kingdom.

The UK stockbroker industry has long been a vibrant and dynamic arena, influenced by a myriad of factors such as regulatory changes, technological advancements, and market trends. Our goal is to bring you comprehensive insights, breaking news, and in-depth analysis to help you navigate through these fluctuations and find your footing in this exciting industry.

In this edition:

FTSE 100 lags behind worldwide developed equity indices

The FTSE 100 has fallen behind the global stock market rally in 2023 due to the Bank of England’s interest rate hikes and falling oil prices. The index has struggled to attract investors and has seen minimal growth compared to other major indices. Weak oil prices, rising rates, and political uncertainty have contributed to its underperformance.

The FTSE’s heavy reliance on interest rate-sensitive sectors and lack of prominent tech companies have affected its appeal. The index has been hit by falling commodity prices and experienced significant outflows.

The Bank of England‘s challenges in curbing inflation have also impacted the market. The strength of the pound has further hurt the FTSE, as its companies earn most of their revenue overseas. While recent cracks in the pound’s strength offer a glimmer of hope, some analysts remain pessimistic about the FTSE’s prospects, citing stagflation and a lack of positive catalysts.

UK stockbroker WH Ireland dips into the red

WH Ireland, a British stockbroker and wealth manager based in London, has issued a warning that it will incur a loss for the financial year due to lower-than-expected trading activity and market volatility. The lack of transactions in capital markets, which has persisted from 2022 into 2023, has particularly impacted the company’s capital markets division. It anticipates reporting pre-tax losses exceeding £2.2 million, with revenues of around £26 million for the recently ended financial year. This is a significant contrast to the previous year when the company virtually broke even.

Despite the challenging market conditions, WH Ireland remains optimistic about its capital markets division’s potential to take advantage of an eventual market upturn, thanks to recent cost-cutting measures. The company also noted that it has maintained stable customer numbers, retaining 88 corporate clients from the previous year. In terms of wealth management, although assets under management slightly decreased to £1.5 billion in March compared to £1.6 billion the previous year, the division achieved underlying profitability in the last six months.

In response to this bleak update, WH Ireland’s shares (ticker: WHI) experienced a 3% decline to 18.43p in Monday afternoon trading. Overall, the company’s shares have fallen by over 20% since the beginning of the year. The price has recovered to 22.00p by the time of writing this article, suggesting that the market has since found courage after digesting this news.

EU plans to block payment for order flow, hampering business models of emerging stockbrokers

The European Union has put forth plans to restrict brokers from offering zero-commission transactions to clients through the practice of forwarding orders to larger trading platforms for a fee. This ban on payment for order flow is part of a wider package of reforms that EU member states have reached a preliminary agreement on with the European Parliament.

Zero-commission trading has been a prominent feature offered by digital brokerages and investing apps as they seek to challenge traditional banks. However, concerns arose among regulators during the meme stock frenzy of 2021 regarding potential imbalances in the execution of retail orders, favoring brokers over clients. This most prominently affected Robinhood, but to some extents impacted other players in the market by changing the calculations on whether the cash rewards of selling trade data was worth the cost.

It is worth noting that this issue is not as prevalent in Europe compared to the United States, where retail investor participation in stock markets is more substantial.

In the United States, the Securities and Exchange Commission has proposed regulations aimed at limiting the relationship between retail brokers and wholesalers. If these proposals are approved without major changes, it is expected that payment for order flow will experience a significant decline.

The European Council has announced that European countries will still have the option to exempt investment firms from the ban under specific conditions until mid-2026. This means that during this period, the ban on payment for order flow would not apply to these firms, allowing them to continue the practice under certain circumstances.

Deutsche Bank shareholders vote to approve takeover of Numis

Numis and Deutsche Bank have recently announced their agreement for Deutsche Bank to acquire the entire issued and to be issued ordinary share capital of Numis through a court-sanctioned scheme of arrangement. The Court Meeting and General Meeting, held in late June, saw shareholders approving the necessary resolutions. At the Court Meeting, the scheme received approval from a majority of Scheme Shareholders representing at least 75% in value of the Scheme Shares. Similarly, the Numis Shareholders passed the Special Resolution at the General Meeting.

With 110,003,459 Numis Shares in issue at the Voting Record Time, the scheme’s conditions 2(A) and (B) have been satisfied. However, the scheme is still subject to court sanction and the fulfillment of other conditions. If all goes as planned, the scheme is expected to become effective in Q4 2023.

Numis intends to seek the cancellation of trading its shares on AIM before the scheme becomes effective. Share certificates for Numis Shares will cease to be valid, and entitlements to Numis Shares held in the CREST system will be canceled on the business day following the Effective Date.

Stay tuned for our upcoming posts, where we’ll uncover the trends, challenges, and opportunities that lie ahead for stockbrokers and investors alike.