The days of trading stocks over the phone are fading fast. For as Barclays Stockbrokers reveals in a new report, the Internet is becoming increasingly dominant, and investors more demanding for access to state-of-the art products.

Barclays Stockbrokers, part of Barclays Wealth, says in a “White Paper” report published today that the arrival of institutional-calibre services for investors is creating what it calls the “instividual”, yet another tongue-twisting term for the financial industry to grapple with.

No longer content just to punt cash equities and pay a far higher fee than big institutions with bulk-buying power, investors of all types want institutional-quality service and pricing across all asset classes. They are pushing into foreign exchange, fixed income, commodities and derivative-type instruments such as contracts for difference.

The Internet has revolutionised trading. Barclays Stockbrokers points out that in 1998, online trades accounted for a tiny 0.1 per cent of all the UK bank’s brokerage turnover. Now it is a whopping 85 per cent, although it has declined slightly from a recent level of 92 per cent in line with recent demand for more conversation times in the recent volatile markets.

To put Barclays’ own data into context, online share trading – including spread-betting and CFDs – as a share of all dealing, has gone up from almost 33 per cent in 2003 to almost 68 per cent this year, according to the research firm ComPeer.

Barclays Stockbrokers is one of the heavy-hitters in the UK online broking world, but it is not alone. Other players in the market both in the UK and internationally include TD Waterhouse, E*Trade and Charles Schwab.

The shift to online trading, which cuts out some middlemen and helps squeeze costs, is benefiting private investors. “There are new investors in town and in the midst of the financial maelstrom caused by the credit crunch they appear to be thinking and behaving like their institutional counterparts,” the Barclays Stockbrokers report said.

It continued: “Just a few years ago individual investors could only dream about having the same resources available to them as professional traders working for financial institutions.  However, the landscape has quickly transformed.”

Barbara-Ann King, head of proposition at Barclays Stockbrokers, says individual investors are starting to get the same prices, and just as importantly, the same transparency and detail about trading deals as professionals. Under a Barclays Stockbrokers’ premium “Level 2” contract, for example, a client can see buy and sell orders for each individual share order as they are entered, amended and executed in real time. This type of offering became increasingly popular with private investors last year, although has yet to reach “critical mass” in usage terms.

However, while retail private investors have more access to share trading platforms than before, individual retail investors still account for a relatively puny slice of overall turnover in the London stock market, for example. According to LSE data cited in the Barclays Stockbrokers report, retail trading makes up only 3 per cent of all trades, including those handled non-electronically. And the portion of shares held by individuals rather than by funds has declined remorselessly since hitting a high of 54 per cent in 1963 to 12.8 per cent in 2006.

So the Internet-driven share dealing revolution has yet to reverse the decline in the share of individual share ownership versus that of institutions. And for all investors, the recent extraordinary gyrations in stock markets will have been a painful experience. “With much more volatility we’ve seen some people being up 5 per cent in a day in their portfolios, whereas they used to be happy with 5 per cent per year,” Des Byrne, managing director and head of Barclays Stockbrokers, told WealthBriefing in a recent interview.

Thanks to its sister firm Barclays Global Investors, Barclays Stockbrokers is able to offer clients trading to such instruments as exchange traded funds, exploiting BGI’s status as the world’s largest ETF provider via its iShares brand. Around 350 iShares are now traded every day via Barclays Stockbrokers - an increase of 300 to 400 per cent compared to earlier this year.  And they tend not to be used as an alternative to funds but as a trading instrument used by the more active and the more wealthy clients – almost as an alternative to a future.

Contracts for difference, which give investors leveraged exposure to markets and are exempt from stamp duty, as are ETFs, have seen strong turnover, meanwhile.

CFDs are an integral part of the Barclays Stockbrokers offering, and their usage surged by 300 per cent year on year in September, 2008, for example. Short positions have traditionally constituted around 30 per cent up of total until their use was recently restricted by Financial Services Authority, the UK’s financial regulator. But when the BBC explained at length how the shorting mechanism works, they immediately went up to 45 per cent of the total.

The stockbroking arm is now getting more referrals from Barclays Wealth, as execution only services are being used by some clients for their “play money”, added Mr Byrne.