More from the Web Report (this week's--my last post was from last week's)
eBrokers - Weekly Stock Volume Report - Scott Appleby -
mailto:scott@rsco.com
The Fed's highly anticipated quarter point hike on Tuesday and
continued neutral bias appeared to have had marginal impact on
this week's NETDEX volumes. Volumes declined a mere 0.9% to 686
million shares traded from 692 million, while NASDAQ volumes for
the week were actually up 5% from 4.2 billion to 4.4 billion.
In terms of price, eBrokers responded much like the broader
markets with a rally (albeit smaller than the broader market on
the whole) just prior to the Fed news only to fall back by
Tuesday's close. At week's end, the eBrokers as a group were down
on average 9.5% for the week while the NASDAQ Financial Index was
down just shy of 1% and the NASDAQ composite was up 3% over the
same time period. We believe the eBrokers, already beaten down by
greater than expected seasonality, are suffering from a
multiplier effect with any additional bad news.
NEW DEALS FOR ACTIVE TRADERS - This past week, two of the
industry's leaders - E*Trade and Schwab -- announced programs to
reward their most active trading customers. E*Trade unveiled a
revamped Power E*Trade program with a scaled pricing scheme that
rewards greater trading activity. The first 29 trades for the
quarter are charged at the regular commission rate. For 30-74
trades a quarter, the charge will be $9.95 per trade for market
orders and $14.95 for limit orders. Then for 75 trades and more a
quarter, the charge will be an industry low $4.95 for a market
order and $9.95 for a limit order. Moreover, Platinum Power
E*Trade holders (75 or more trades a quarter) will be given
preferred access to IPOs versus the old first come, first serve
method originally used by E*Trade.
Schwab introduced Velocity, like E*Trade, geared toward rewarding
Schwab's more active traders as defined as those making more than
12 trades per year. However, Velocity, true to its moniker, will
focus on increasing the transfer speed of its customers' orders,
an important element to receiving best execution. Velocity will
provide access to a dedicated Web site where customers can submit
multiple orders while still having access to Schwab.com
(simultaneously if necessary), where they can continue receive
research, real-time quotes, and other value-added services.
We are not that surprised to see E*Trade and Schwab's reward
their most active trading customers. Given the low switching
costs and increased competition among the top industry players,
E*Trade and Schwab through price incentives and improved
execution speed, respectively, have provided considerable
differentiation among its peers. Moreover, we believe market
segmentation based on trading activity or assets makes
considerable sense given the favorable economics from customers
that either trade more often or park more of their assets with
the firm.
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