William:
This article bodes very well for our EVIS play:
Brokerages see gold in 24-hour global
trading
By Sandeep Junnarkar
Staff Writer, CNET News.com
September 10, 1999, 9:55 a.m. PT
A long-term dream of offering worldwide 24-hour trading has
brokerages rushing to plant their flags across Europe and Asia.
This week, for example, Fortrend, a division of U.S.-based broker Fortrend
Securities, launched a service that will allow Australian investors to trade U.S.
securities. The move comes months after E*Trade, Charles Schwab,
Ameritrade, and others took strong measures to position themselves
overseas.
While some online brokerages are reaping small rewards by offering their
services abroad, most industry experts don't expect a true windfall for several
years to come. To succeed, brokerages must jump several hurdles--including
changing cultural attitudes toward trading equities and surmounting
technological barriers.
But the payoff could be big and the prospect of clients trading at any given
moment from any point around the globe is simply too enticing to ignore. Most
analysts point to the Far East, including Japan and Hong Kong, as the regions
with the greatest potential for growth in online trading.
"Our view of most foreign markets is that they are just in their infancy, and this
would be a really good time to participate in the development of those
markets," said Ameritrade vice president Michael Anderson.
Ameritrade cut a deal with France's Cortal that will
allow its U.S. customers to trade French equities
while allowing Cortal's clients to trade U.S. stocks.
The company has also partnered with Deutsche
Banc to provide services to German investors. Still,
the company does not expect to see its overseas
business bloom for another three to five years.
Online trading firms venturing overseas, nearly
across the board, cite the same barriers to
success. These include an Internet infrastructure
that needs much improvement before it can
support greater numbers of consumers online,
local regulatory hurdles, and populations that are
far from primed to trade equities.
"Technological problems can be overcome, but
cultural mindset is always a factor," said Dan Burke,
a senior brokerage analyst at Gomez Advisors. "The
domestic Internet brokerage market has been so
strong because of the American disposition toward equities and a very warm
stock market over the past eight years," Burke said.
To cite an example of cultural barriers, Burke said that most Japanese
investors were so badly battered when the Nikkei exchange tumbled during the
Asian economic crisis last year that they are now stashing their assets in
low-interest saving accounts.
"That is something facing all brokerage houses as they move into Japan," said
Burke. "How do they educate investors to realize the long-term potential of
being in an equities investor?"
In some countries, there are already clear indications of how powerful online
trading could become. As E*Trade and Schwab continue to battle it out in the
United Kingdom, a recent survey showed that the number of online trades in
the United Kingdom surged 73 percent in the second quarter. DLJ Direct, a
unit of Donaldson, Lufkin & Jenrette, started its U.K. service last week.
While other countries are not as far along as the United Kingdom, analysts
agree the move overseas is a necessary strategic plan for brokerages "to
diversify their revenue stream, instead of relying solely on the U.S. market,"
Burke said.
Grab yourself a partner
While local competition abroad may not pose much of a threat for U.S.-based
companies, they will need to form partnerships with regional firms to navigate
regulatory rules.
"A local partner will be especially important in the more underdeveloped
countries," said Ray Dirks, an analyst at investment firm Security Capital
Trading.
Like Ameritrade, E*Trade has also signed several international alliances to
bring its branded services to about 20 markets worldwide.
"We intend to rely primarily on local third parties for regulatory compliance in
international jurisdiction," the company said in its latest quarterly Securities
and Exchange filing.
E*Trade said it would generate revenue through licensing fees and royalties
based on each partner's transaction revenues. According to the company's
SEC filing for the third quarter, international revenues actually dipped
compared with year-ago figures. The company generated $1.9 million for the
quarter this year compared with $3.1 million for the same period last year. |
