Variation in share price between dealing accounts

longwalks1

While comparing share dealing accounts online, and the different costs to trade (ranging from £5.95 to £12+ per trade), I was wondering if the prices they get the shares at for you varies much?
Do the accounts with cheaper fee's not get as good a price for you, and so make up the difference this way?

Or is my brain doing too much thinking for a New Years Day??

mathsmaster

I personally use X-O.co.uk at £5.95 per trade and have always got the exact same price for buying or selling that I see quoted on various different platforms (thisismoney and the Firefox share price plugin). They have also been very efficient at answering emails and transfering funds in and out of the account so would certainly reccomend them

westy22

A second vote for X-O who seem to consistently get the current market price when compared with Google Finance LSE 'live' feed.

On the rare occasions that I have bought shares with H-L I have received a message stating that they have applied a 'Share Price Improvement' to my purchase which has saved me £x.xx - don't know quite how that is measured or achieved though.

Stompa

westy22 wrote: »

On the rare occasions that I have bought shares with H-L I have received a message stating that they have applied a 'Share Price Improvement' to my purchase which has saved me £x.xx - don't know quite how that is measured or achieved though.

Selftrade do something similar. I've no idea quite how it works either!

bowlhead99

mathsmaster wrote: »

I personally use X-O.co.uk at £5.95 per trade and have always got the exact same price for buying or selling that I see quoted on various different platforms (thisismoney and the Firefox share price plugin).

westy22 wrote: »

A second vote for X-O who seem to consistently get the current market price when compared with Google Finance LSE 'live' feed.

Unless you're dealing in massive volume (i.e. within 'normal market size', all brokers should be able to place your trade at the 'official' bid or offer price. If the offer price for BARC is 271.95p and the bid price is 271.85, then you will be able to place a trade to buy up to 10,000 shares and it won't cost you any more than 271.95p a share. You may of course pay less. If selling, you'll get at least 271.85 and might get more.

Google finance as far as I can see will only show the live mid-price of 271.90. Thisismoney, and others like the free versions of bloomberg and reuters will show the bid and offer, but only on a delay of 'at least 15 minutes' so IMHO it's not really practical to use these to see whether you achieved 'the exact same price' as they report, especially as the price changes every second. I suppose if you are dealing in a thinly-traded stock, the bid and offer prices are not changing every second (maybe only 5 times a day) and you could go back after the 15 minutes and check. And you can look at 'last 5 trades' data on the london stock exchange website to see if your price is out of whack with everyone elses.

Of course, on a thinly traded stock the bid/offer spread will be much larger than the 0.04% on BARC and there is more wiggle room to beat it noticeably. If you are always getting 'the exact same' as the quoted bid or offer price, you are perhaps not getting the value you could. The fact your broker offers trading for £5.95 may be because they just give you the price from the best or quickest market maker they ask, and they don't always ask all of them that exist, so you might have been £30 better off by paying your £12.50 fee to the broker down the road. I think this was the point that britishboy was asking.

I think we can say that the cheap brokers are not bolstering their commission by adding something to your price and keeping it for themself, nor failing to properly get a decent quote in line with the procedures their internal policies tell them to follow. They are regulated and owe you a duty of best execution as per the FSA rules. But this doesn't mean the price they get by following their policies is as good as another broker with different policies or different pricing sources.

Ideally you want a broker that checks the greatest number of market makers. However most don't publish this info and even if they did, if a broker says they check "up to 20 market makers to get you a great price" or "we beat the spread half the time!", this doesn't necessarily guarantee they'll check all five of the five MMs who are making a market in your particular thinly-traded AIM stock of choice.

On the rare occasions that I have bought shares with H-L I have received a message stating that they have applied a 'Share Price Improvement' to my purchase which has saved me £x.xx - don't know quite how that is measured or achieved though.

I get this from my broker TD Direct too, whereas with SIPPdeal they just confirm what price I got and I can work out the improvement for myself. It's 'achieved' by simply buying the shares from someone who is selling them for less than the official offer price, which happens all the time - as mentioned, the offer price is the maximum you'd have to pay to be able to buy a 'normal market size' amount of shares.

And it's 'measured' by looking at what you paid versus what you would have paid to buy that number of shares at the market quoted offer price. You should get it on sales as well as purchase (same principle, comparing what you received vs the official bid price at that moment)

This came up a few months back, see forums.moneysavingexpert.com/showthread.php?t=4064443

westy22

Thanks, bowlhead - useful information.

It is certainly interesting to look through recent deals on a share on the H-L website. I was looking through purchases of AAS over recent days and there are some large variations in buying price and not always obvious why. I saw some quite low buying prices for relatively small numbers of shares sandwiched in between higher prices for £10k to £15k purchases. I would have expected larger purchases to attract a better price!

bowlhead99

westy22 wrote: »

I saw some quite low buying prices for relatively small numbers of shares sandwiched in between higher prices for £10k to £15k purchases. I would have expected larger purchases to attract a better price!

This is as expected. If you want to buy a lot of shares, a market maker will want you to pay a lot of money for them, it's supply and demand.

Using Monday's prices as an example, price near the end of the day was 902p bid, 914p offer. If I wanted to buy 100 shares I could definitely do this for £914. In fact there were a lot of buys at around 910p that day. But if you want more serious quantities you'll pay more. Imagine the market makers at a point in time have orders from loads of people wanting to sell, in total, 5,000 shares. Then you come along and you say you want to buy 10,000.

The only way to make 10,000 shares available for you is by you paying a higher price. You'd be lucky to pay only £91,400 for the shares unless you worked the order through in small quantities throughout the day as new sellers came on to the scene. Now imagine you wanted to buy 35 million shares. Only 36 million shares exist on the entire planet and you can bet some people want to keep them. You are not going to be able to buy for as little as 914p.

Same principle if selling, you can't dump a million shares on the market and expect people to take them off your hands for the same price as you could sell 100 shares for. You have to create demand by dropping the price.

So big trades tend to go outside the spread while small ones are often successful within it. Another aspect is that large trades may be reported late once they've been filled over a period of time, so they might look out of whack with other trades reported the same minute, or there might be small or large broker-to-broker trades at funny prices.

westy22

Well I learn something new every day. I suppose my mindset is more business oriented rather than financial services as I always expect to get a better (cheaper) buying price when I am wanting to buy more of something.