Transforming Financial Markets to Retail Investors - A Comparison of the U.S. and the German On-line Brokerage Market

Fundamental changes in private investments are currently observable for the German stock market. The importance of equities as an alternative to traditional kinds of private investments has grown remarkably and technological progress provides new ways for private investors to participate actively in the capital markets in order to take advantage in securities trading. One of the latest developments in the area of investments in Germany seems to be the rise of ECNs. Since there is a rather large delay in development of the German brokerage market in comparison to the U.S., it is the aim of this contribution to determine (in a qualitative manner) possible future trends for the German retail brokerage market. Differences and parallels of the evolution of electronic brokerage systems in both countries will be analyzed by using the transaction phase model in order to systemize possible on-line brokers’ and ECNs’ strategies.