READ THE BOLD PRINT....
FOCUS-Schwab posts big drop in May trading activity
Reuters, Monday, June 14, 1999 at 13:32
(Adds byline, stock prices, details, analyst's comment)
By Jack Reerink
NEW YORK, June 14 (Reuters) - Charles Schwab Corp. (NYSE:SCH),
the nation's largest discount and Internet broker, on Monday
reported a big drop in last month's trading activity, sparking
a sell-off in its shares and those of other Web brokers.
San Francisco-based Schwab processed 150,000 trades a day
in May, down 28 percent from the record 207,700 trades a day
the previous month. The firm's monthly trading reports are
widely watched as an indicator of the Internet brokerage
industry's health.
The brokerage, which processes around two-thirds of its
trades through its Web site, said trading volume still was up
78 percent from 84,400 trades a day in May 1998.
"April was an incredible month and May was going to slow,"
said analyst Scott Appleby of BancBoston Robertson Stephens.
Appleby, who also linked the drop in trading activity to a weak
U.S. stock market in May, said most Web brokers experienced a
similar decline in trading volumes last month.
Still, the news caused shares of Schwab to drop $6 to
$88.31 on Monday morning, and other Internet brokers followed.
Shares of Ameritrade Holding Corp. (NASDAQ:AMTD), the No. 6
Internet brokerage, fell $5.75 to $73 and the stock of the
second-largest Web broker, E*Trade Group Inc. (NASDAQ:EGRP), fell
$2.50 to $35.25. Ameritrade and E*Trade shares now trade at
around half of what they were worth just two months ago.
Shares of DLJdirect (NYSE:DIR), the Internet brokerage
majority-owned by investment bank Donaldson Lufkin & Jenrette
(NYSE:DLJ), dropped $2.44 to $25.06. The stock of Knight/Trimark
Group Inc (NASDAQ:NITE), the Nasdaq market maker that processes the
brunt of Internet trades, dropped $5.13 to $47.75.
"The (May trading volumes) are bad sequentially, but --
frankly -- April was an anomaly," Appleby said. "The market is
starting to realize that, so stocks are coming back a bit."
Customers of Internet and discount brokers generally trade
more in a rising stock market than in a falling one. In
record-breaking April, for example, the U.S. stock market's
main gauge, the Dow Jones Industrial Average, rose more than 10
percent, but in May the index dropped about 2 percent.
In fact, Schwab last month already said that May trading
volumes were trailing off from an unusually strong April. The
quarter-over-quarter drop is the broker's second this year,
after trading volumes declined 18 percent in February to
150,900 trades a day, from a then record 184,000 trades a day
in January.
Schwab, which has more than 6 million active customer
accounts, said that client money -- assets held by all Internet
and discount customers at Schwab -- dropped to $560.7 billion,
down $3.6 billion from $564.3 billion in April. Customer
assets, however, were up 36 percent from $406.7 billion in May
last year.
Schwab customers made an average 41,800 mutual fund swaps
in May, down 21 percent from April but up 10 percent from May
1998.
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