Web Street plans to separate from FleetBoston
By Bloomberg News
Special to CNET News.com
January 4, 2000, 9:20 a.m. PT
DEERFIELD, Ill.--Web Street Securities said it applied with the National Association of Securities Dealers to become a self-clearing brokerage firm, a move that would sever its relationship with FleetBoston Financial, which allowed the Internet broker to offer some customers free trades.
Web Street, which averages 4,125 trades daily compared to Charles Schwab's 117,800 trades, offers free trades on most Nasdaq orders of at least 1,000 shares. The firm is compensated on these trades by payments from FleetBoston, its clearing firm. Most other Web trades cost $14.95.
Deerfield, Ill.-based Web Street said self-clearing will let it offer customers after-hours trading, lower margin rates and additional trading opportunities for international customers.
The company said it expects the move to lower its costs while increasing interest income.
"The establishment of our self-clearing operation is one part of our growth strategy of increasing our online financial services offerings for our customers while expanding our international presence and operations," Joseph Fox, Web Street's chief executive, said in a statement.
Web Street's contract with FleetBoston's U.S. clearing unit, which paid the online brokerage 2.5 cents a share for Nasdaq trades in stocks priced above $2, expires April 30.
"After April 2000, when our order flow payments decrease, it may no longer be economical for us to continue to offer these free trades, and thus, we may lose the competitive advantage we gain by doing so,' the firm said in the November prospectus it filed with the Securities and Exchange Commission.
Web Street got 39 percent of its revenue in 1999 from its payment for order flow arrangement, compared with rival E*Trade Group, whose latest full-year figure was 11 percent.
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