Schwab latest Web broker to court active traders
By Jack Reerink
NEW YORK, Aug 24 (Reuters) - Charles Schwab Corp. (NYSE:SCH - news), the nation's largest discount and Internet brokerage on Tuesday became the latest mainstream Web broker to court active stock traders with software that allows speedier trade processing.
San Francisco-based Schwab last week sent the software package to 40,000 of its best customers. The customers, who have $1 million in their accounts or put in as many as 48 trades a year, can use the software to trade stocks in different accounts while simultaneously being connected to Schwab's main Web site.
Users will bypass Schwab's main Web site and send their stock orders to the broker though another Internet pipeline, which speeds up the process. The difference can be measured in seconds, but is important to active traders, who often aim to profit from small moves in stock price.
The company, which will offer the software to around 10 percent of its 6.2 million customers, also said it will start offering real-time stock quotes of Nasdaq market makers and stock matching systems in the fourth quarter. Active traders often want access to these quotes to implement their trading strategy.
``Active customers have told us over and over again that speed and access is what they want,' said Jamie Moldafsky, the Schwab vice president in charge of the project, in a short telephone interview.
Schwab is following other Web brokers in courting active traders. E*Trade Group Inc. (Nasdaq:EGRP - news), the no. 2 Web broker, last week said it cut commissions for active trades and the brokerage arm of mutual fund company Fidelity Investments last month launched a revamped Web site for active traders.
``As these firms are building mutual fund and other services fro mainstream investors, they need to make sure they keep (catering) to active traders,' said Dan Burke, the brokerage analyst with market research firm Gomez Advisors. ``These people are a very strong revenue stream for the firms.'
Previously, only smaller brokerages, such as the A.B. Watley unit of Internet Financial Services Inc. (Nasdaq:IFSX - news) and day trading firms, such as New York-based Tradescape.com, targeted active traders by offering fast trade processing and quotes.
But A.B. Watley, which has around 3,000 customers for its premier service, said it does not worry about big Web brokers' invading its territory.
``People always ask us: 'How can you compete with the likes of Schwab or E*Trade?,' said Tony Huston, A.B. Watley's head of strategic planning. ``The answer is experience, technology and service. We have one broker for every 110 clients.'
The moves by mainstream online brokerage to court active traders coincide with slowing industrywide growth. Investors funneled an estimated 500,000 trades through the Internet in the second quarter, about the same as the first quarter. Previously, online trading volumes had racked up double-digit increases each quarter.
Schwab's move to better service active traders is somewhat of a change of strategy, Schwab's Moldafsky acknowledged.
Over the past two years, Schwab has successfully concentrated on winning over wealthy clients who previously might have given their business to full-service brokers. The firm's client assets stood at $587.3 billion at the end of July, up 37 percent from $428.8 billion a year ago. |
