Online Broker
On-line brokerage has significantly changed the dynamics of the marketplace, causing one of the biggest shifts in individual investors’ relationships with their brokers since the invention of the telephone. For the first time ever, investors can — from the comfort of their own homes — access a wealth of financial information on the same terms as market professionals, including breaking news developments and market data. In addition, on-line brokerage provides investors with tools to analyze this information, such as research reports, calculators, and portfolio analyzers. Finally, on-line brokerage enables investors to act quickly on this information.
Barron’s Ranks 22 Leading Online Brokers
Barrons ratings range across eight different categories and are assigned rankings from zero (lowest) to five stars (highest) and any point in between. These scores are then totaled and averaged to arrive at an overall position.
| Online Brokers | Stars |
| thinkorswim | 4.5 |
| MB Trading | 4.5 |
| Interactive Brokers | 4 |
| TradeStation Securities | 4 |
| optionsXpress | 4 |
| Fidelity Investments | 4 |
| TradeKing | 4 |
| tradeMONSTER | 4 |
| OptionsHouse | 4 |
| TD AMERITRADE | 4 |
| E*TRADE Securities | 4 |
| ChoiceTrade | 3.5 |
| Muriel Siebert | 3.5 |
| Lightspeed Trading | 3.5 |
| Charles Schwab | 3 |
| Scottrade | 3 |
| Zecco | 3 |
| SogoTrade | 3 |
| Terra Nova | 2.5 |
| Just2Trade | 2.5 |
| Firstrade | 2.5 |
| Cobra Trading | 2.5 |
All data regarding fees and costs based on an account with $100,000 in assets.
Interest rates and margin fees as of Feb. 16, 2010
Stock commissions based on a block of 500 shares
Options commissions based on a trade of 10 contracts.
Source: Barron’s Online Broker Survey, data effective 2/16/10
By the end of the year 2000, more than 6.5 million US households have traded through 13 million online brokerage accounts, according to eMarketer, which projects 17.4 million US households trading through 31.3 million online brokerage accounts by 2004.
Many emerging e-commerce companies, especially those focused on business-to-consumer (B2C) e-commerce, are in an aggressive phase of recruiting new customers in what analysts have called a “land grab.” These firms devote a large amount of their resources to advertising and promotion, and increasingly to outright customer subsidies. For example, E*trade offered $400 in free computer merchandise for new customers who signed up between January and March 2000. E*trade also spent about $400 million in 1999 on selling and marketing, representing over 60% of their non-interest expenses and over 45% of net revenue. Customer acquisition costs, which are estimated to range from about $40 per customer for Amazon.com to over $400 for some online brokers (McVey 2000), are probably the largest contributor of cost to new B2C start-ups and represent a substantial portion of the initial financial losses these firms typically incur. Clearly, the expectation is that these early investments in customer acquisition will result in a long-term stream of profits from loyal customers, which will offset these costs.