As this supplement goes to press, there are 27 online brokers operating in the UK. Over half of them are internet versions of established stockbrokers, large and small, from the likes of Barclays Stockbrokers to Bristol-based Hargreaves Lansdown. There are a clutch of North American imports - Charles Schwab, DLJ Direct, TD Waterhouse and E*Trade - all of which are growing fast. Two brokers - E-cortal.com and Selftrade - are French-owned and Comdirect is German. Two more - Sharepeople and iDealing - are start-ups by UK-based internet entrepreneurs.

Nothing-ventured is the dealing arm of internet consultancy Durlacher. Mybroker, technically one of the most advanced of the online brokers, is a spin-off of Options Direct, a company that markets options trading to the retail investor.

Virgin, one of the latest newcomers, is the first new-age financial services brand to enter the market. Egg has joined the party, too. Both Virgin and Egg use "white label" broking services.

These are services provided by existing brokers, in this case Sharepeople and Xest respectively. That model is likely to be followed by others. Citibank, the US bank and one of the founding fathers of internet broking in the UK, is developing a broking service in conjunction with Stocktrade (the online an telephone arm of traditional broker Brewin Dolphin). For the consumer, white labelling adds to the confusion in the market. Sharepeople, through Virgin, for example, will be cheaper but more restrictive. But in some cases there could be benefits. Citibank, for example, is promising to add extra services to the Stocktrade backbone.

A common promise from all online brokers, regardless of their bent, is that they will be faster and easier to use than their offline cousins. Some achieve that more successfully than others, and the quality of service differs markedly.

What shares?

All online brokers will buy and sell shares for you, but that is about the only thing they have in common. For the time being, the range of shares accessible via an online broker remains limited. Most will allow you to trade any UK listed share, either on the main market of the London Stock Exchange, or on the Alternative Investment Market (Aim), which specialises in smaller, high-technology stock. The exception is French-owned broker E-cortal, which doesn't give you access to Aim and restricts its range of UK shares to the FTSE 350 index of the 350 biggest listed companies.

Shares in Ofex, the small over-the-counter market, cannot yet be traded online, although some brokers will take orders via their telephone trading arms - often for extra commission - and Barclays is working on an online Ofex service.

A few brokers refuse to take orders for so-called residual shares online. These are the shares of a handful of small companies - registered abroad, but listed in London - whose trades cannot be routed through Crest, the settlement body.

Online brokers are unlikely to give you access to foreign shares. DLJ Direct and Schwab let you trade US shares, but insist on a dedicated dollar-denominated trading account for the purpose. Trades are cheaper than UK ones, since the brokers link you into their parent company's dealing services in the US, where commissions are lower than in the UK.

Mybroker gives you full access to all shares on the main American market and Nasdaq, the US high-technology market. You can pay from your sterling trading account and commissions, at a flat $15.95, are cheaper than UK trades. Access to European shares is due to be added as this report goes to press.

Sharepeople gives you access to most US shares and a selection of larger stocks from European exchanges. But commissions tend to be substantially higher than its flat-rate £17.50 for UK trades. The same is true of Fastrade. E-cortal offers the widest range of foreign shares, at cheap rates.

Others promise grand things in the near future. TD Waterhouse's US and European share service is due for launch soon. And E*Trade's master plan is to have dealing operations in markets around the world and to interlink them, so Britons can trade US and Japanese shares as easily as UK ones. The roll-out of this global service has already begun.

Thanks to the automation of the online environment, flat rates for dealing in any major world market are expected to be the norm within a year or two.

Traditional offline brokers are normally able to trade in any market for you, but commissions can be prohibitively high because of the number of third parties brought into the process.

For the time being, if you want to trade foreign shares online, you might be best served by opening an account with a local online broker. Several French and German brokers, for example, give you access to all the main European markets.

There are some drawbacks. You will probably need to speak the local language - only a couple have English language sites. You will have to deposit cash locally. And the tax liabilities on your trading will start to get complicated.

How to hold your stock

If you like the feel of paper certificates, online share dealing is probably not for you. Only Barclays and NatWest offer a free certificated service. Sharepeople and Stock Academy give you the option but charge respectively £2.50 and £5 per holding.

Virtually every other broker insists that you trade via a nominee account. This means shares are not held in your name. The benefit is that trades can be executed and settled instantly because certificates do not need to be sent through the post each time a share is bought or sold. There are disadvantages to nominee accounts. A nominee facility could cost nothing with DLJ or Killik or as much as £120 (if you have 30 stocks or more with Schwab).

A few brokers offer a third way. Sponsored Crest membership - which means your broker registers you directly as a personal member of Crest, the settlement body - is as fast and efficient as the nominee model but avoids the drawbacks. As with an old-fashioned share certificate, you are the shareholder and you get all the rights that go with that.

However, sponsored membership does not allow you to trade shares outside Crest's settlement jurisdiction (currently the UK, Switzerland and the US). For the time being, this poses little practical difficulty since the range of foreign shares available via the online brokers is so restricted - but it could cause friction in the future.

Timing

The internet never sleeps. The rule applies to nearly all the online stockbroker sites, too. However, a few do impose restrictions. Stocktrade and Barclays only accept orders during market trading hours (8am to 4.30pm). Halifax has a slightly more bohemian 8am-10pm service. All the other sites accept orders 24 hours a day, seven days a week, although of course the deal is only transacted once the market opens when the share price may be poor see the chapter on security.

Another consideration of timing concerns the prices and speed at which you deal. All online brokers should tell you, as you trade, the share price that is on offer. But only a few - Stocktrade, myBroker and E*Trade (for frequent traders) - will update the prices on your screen as you are preparing to trade without you having to refresh the screen.

With the exception of a few of the smaller brokers - Hargreaves Lansdown, Cave & Sons and Goy Harris Cartwright - all will execute your deal in "real time", plugging your deal into the market there and then via a process known as straight-through processing. The alternative - an e-mail-type service called "order routing" - can be inefficient since it relies on a human broker picking up the message and executing the trade. This also leaves more room for pricing and dealing errors.

The timing of settlement - when you can expect to take ownership of shares and when you must pay for them - is also relevant to the online debate. Currently, the market standard for the settlement of deals is "T+5", which means payment and transfer of ownership must be completed within five days of the trade's execution. That applies whether you use a traditional stockbroker or an internet-based service. In practice, many online brokers will settle in T+0 if required - if you sell stock on Monday, cash will be available for reinvestment on the same day.

In February of next year, the market's standard T+5 will change to T+3. Any trades, online or offline, that rely on paper share certificates will find it an administrative impossibility to complete a deal in T+3. A two-tier standard - T+3 for nominee and Crest accounts, and T+10 for certificated shares - is expected to develop. Some say that could lead to differential pricing to reflect what will in effect be a week's extra credit on buying certificated stock, and extra administrative costs for brokers. Sharepeople, Stock Academy and Brewin Dolphin (Stocktrade's offline parent) already impose charges for a certificated service.

Fees

iDealing charges a flat rate £10, Hargreaves Lansdown charges £9.95 and the Share Centre's commissions start at as little as £2.50 (for buying shares) or £7.50 (for selling them). E*Trade cuts its tiered commissions to a flat-rate £8.95 for anyone who trades more than 30 times every three months (from the 31st trade onwards for that quarter).

The rest tend to start at about £12 and go up to a maximum of £30 or so for large deals. But the range of prices in the market is surprisingly wide. Killik, the Share Centre and NatWest have no commission cap, so are probably a bad bet for large deals.

But remember there is more to the cost of trading than commissions. Registration fees are uncommon - keen as the online brokers are to get your business. But most brokers still charge an annual management fee (normally levied to pay for your nominee service). DLJ, Killik, myBroker, Selftrade, Virgin and Halifax do not impose annual charges. The others impose flat rates of between £20 (iDealing) and £50 (Sharepeople, E*Trade, Hargreaves Lansdown and Nothing-Ventured). Watch out for Charles Schwab and the Share Centre whose annual fees vary depending on how many stocks you have in your portfolio. At the Share Centre, for example, you could pay £5 (for one stock) or £200 for 40 stocks.

There is one final sting in the tail - so-called "transfer-out" fees. Again apparently connected with nominee account administration, a broker may charge up to £25 per holding of stock to shift your holdings to another broker. Exceptions, where the service is free, are E*Trade, Sharepeople and Halifax.

Increasing competition among online brokers is good news for private investors as it is gradually driving down the cost of commission .

Individual savings accounts and funds

Several of the online brokers make self-select individual savings accounts available online. There is normally no maximum on the number of stocks you can hold in a self-select Isa, though too many (with commission levied on the buying and selling of each one) won't be cost-effective. Halifax, Killik, RedM, TD Waterhouse, Comdirect offer self-select Isas. Isas can also be "wrappers" around funds rather than individual stocks.

One traditional broker, Hitchens Harrison, has taken the unusual step of not becoming an online broker, but of offering only funds online, via its site.

Virgin, which has linked with Sharepeople to provide its own sharedealing service, and Egg, which has linked with Xest, also both operate large fund supermarkets. Egg's has around 200 funds available inside or outside an Isa wrapper. Virgin's, which stocks only no-load funds (those with no initial charges), has 45 funds. Barclays and NatWest also have plans to launch fund supermarkets, and Schwab and TD Waterhouse have expressed interest in selling funds.

A new form of fund - so-called exchange traded funds, marketed by Barclays Global Investors as "ishares" - may take off online, too.

ETFs are a US import and give you the open-ended structure of a unit trust (which will expand and contract in size in line with demand), in the form of a listed share. They will normally act like a tracker fund, following the fortunes of the FTSE 100 index, say, but will be much cheaper in terms of charges. Comdirect sells ishares commission-free within an Isa wrapper.

Other services

Most brokers provide a range of "added value" services.The chapter on Broker Support elaborates on what else brokers have to offer.