Trading Stock On Web Grows Amid Barriers
NEW YORK (Reuters) - For stock market investors looking for ways to trade more cheaply, the Internet could be the answer to
their dreams but the technology may be years away from replacing traditional brokerages.
The U.S. Securities and Exchange Commission (SEC), while acknowledging that the Internet is transforming the industry, says
online investors complain about the speed and accuracy of their stock orders.
And although analysts agree this segment of the electronic commerce world is more mature than others, they also say the quality
of technology and general fears about sending money into cyberspace keep Web trading from becoming more popular.
"There are a great number of people interested in the Internet, but they don't want to experiment with their own money," said V
Eric Roach, president of Discover Brokerage Direct, the online arm of Morgan Stanley Dean Witter Discover.
Roach's employer, a giant of the old brick and mortar trading world, moved into Internet investing by buying the online firm
formerly called Lombard Brokerage -- a step that indicates it sees investors becoming more comfortable experimenting with their
own money in cyberspace.
About 1.5 million investors have online brokerage accounts, according to the SEC.
Three to four percent of all trading volume on Wall Street goes through electronic brokerages, said Keith Benjamin, an analyst with
Banc America Robertson Stephens.
He sees 10 to 20 percent of the market's volume being traded electronically in the next five years.
For now, though, investors who trade on the Internet are mainly men between the ages of 35 and 55. According to the U.S.- based
Securities Industry Association, cyber-investors tend to trade more frequently and are more aggressive in their investing style than
investors who still rely on traditional brokerages.
They also tend to be better educated and comfortable with technology, and use computers for professional reasons.
"A lot of the hot-shot investors are in California, with Silicon Valley's values," said Vernan Keenan, an analyst with
Internet market research firm Zona Research.
Cyberspace offers these investors a bargain and independence.
Compared to an about $80 trading fee offered at many brick and mortar brokerages, online services charge between $8 and about
$30 a trade.
Investors are also lured online by 24 hour access to their portfolios and all the information they can find, analysts said.
But technological glitches, often during busy trading periods keep investors from finding all that information and processing their
order quickly and accurately.
"Between myself and a friend, we lost more than $50,000 due to our inability to execute trades all morning," a customer of online
brokerage E+Trade Group complained after October's drop in the U.S. stock market.
E+Trade at that time responded that their computer systems worked fine and blamed phone lines for any problems.
SEC spokesman John Nester said the number one complaint it gets from online investors is about delays by cyber-brokers in
processing orders -- and failures to process their orders altogether.
Investors also complain about mistakes in their cyber- trades of stock.
"We get complaints like 'I wanted five shares, I ended buying 500'," Nester said.
Beyond these complaints from investors who are already online, the same barriers that impede other forms of electronic commerce
also stand in the way of online securities trading, analysts said.
Overall, investors have not yet grown as comfortable with sending their money through the Internet as people currently are with
making bank deposits through automatic teller machines.
John Reed Stark, an SEC spokesman, said concerns about fraud and the "dark side of the Internet" still existed.
And analysts say the Internet, designed nearly three decades ago, was never meant to handle massive flows of transactions.
Ultimately, though, they predict that an inevitable growth of all forms of electronic commerce will bring more investors online.
These forecasts, along with reports of growth in computer sales, speedier Internet connections and technological innovations, are
cheering online brokers.
"Someday," said Roach of Discover Brokerage Direct, "there may be
a time when an elderly person in Florida will turn on channel
63 of their television and take care of their investments."
Moonray does NOT like to be referred to as elderly but DOES
like all the "senior discounts".<g>
o~~~ O |
