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Strategies & Market Trends : The Final Frontier - Online Remote Trading
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To: Dan Clark who wrote (7946)2/2/2000 10:37:00 AM
From: TFF   of 12617
 
Briefing on Charles Schwab Corp. (SCH) : Major online discount broker is getting more serious about catering to the active day-trader as the company announced an acquisition this morning that could further reshape the landscape. This morning Schwab announced that it would acquire CyBerCorp, a privately held electronic trading technology and brokerage firm that provides online trading services to the real day-traders, for approximately 13.7 million shares or around $488 million based on last night's closing price. At the same time, Schwab announced new commission reductions for its most active retail customers, cutting online equity commissions for eligible customers from $29.95 to as low as $14.95 for customers surpassing 60 qualifying trades in a quarter. This matches what CyBerCorp currently charges their customers. While this latter move to reduce commissions will be viewed as a positive by investors that conduct five trades or more per week (5 trades x 12 weeks = 60 trades), one could argue that this new commission policy is a way of raising prices for the true active day-trader. In many instances, active traders currently pay around $0.015 per share or $1.50 per 100 shares. On many of these specialized day-trading services, they also charge an additional dollar if one of were to use a specific electronic communications network. Hence, by lowering commissions for the retail customer, the true active trader that trades less than 1000 shares per transaction will end up paying higher commissions under this new plan. In the end, Schwab is really paying $488 million for the technology that CyBerCorp provides, not the client list and will force the other established discount brokers to re-examine their commission structure. The news is already having an impact among some of the lower commissioned trading firms like E*TRADE Group (EGRP 19 15/16), as EGRP stock is currently trading about a dollar lower on Instinet. Other established discount players are expected to feel a similar down-draft this morning. - RN
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