it's an unbelievably stupid move on the part of Ameritrade.
the following is taken from that website (read the last paragraph... "hopefully we will be able to survive"..., not the kind of place you want to send your money to):
"How We Exist
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Freetrade.com is a new virtual broker aimed at a specific niche market. This company is a new iteration of the continuing evolution of e-commerce. A customer must qualify for an account by being experienced in using a discount broker and using the Internet among other items.
For these experienced customers, we offer this service with limited activities and limited costs of operation. Every cost not necessary for brokering activity of executing stock trades has been eliminated.
Marketing and advertising costs are reduced to little or nothing. This company must grow by word of mouth, or referral. Hopefully, the Internet, with its new communication paradigm, will be able to funnel enough new accounts to make the company grow. If you qualify for a new account and do indeed use the service, we need you to tell others. If this referral system does not work and Freetrade.com does not open many new accounts, the company will not be successful.
The second important manner in which we have reduced costs is that all communications with customers is by and through the Internet. E-mail needs to be used for all communications, including statements. We do not have a telephone or office location for customer service. We also do not have the costs of people opening mail. To fund an account, you must send the money by wire, as explained in our account opening directory. We will also send you money by wire. We are not only the Ultimate Discount Broker, but we are also the Ultimate Electronic Broker. If you would not be happy or comfortable with this type of operation, then Freetrade.com is not the broker for you.
All trades and customer service will be executed by and through the Internet. Customers will not be able to telephone Freetrade.com. You can understand this would help reduce our costs of operation and increase our opportunity to succeed. E-mails for customer service will be responded to quickly, and confirmation of trades will be reported immediately.
Our site features dynamic postings of your account activity. Your account positions, margin balances and transaction activity will be updated in real-time throughout your portfolio. In the event that the primary trading site is unavailable, we built a truly redundant back-up trading site that will seamlessly handle your orders. The site will automatically appear on the web-trading page, with a notice to you of its implementation.
We don't make a market in any stock. This is also true of Ameritrade Holding Corporation and its other subsidiaries. We don't execute any orders so all orders are routed to the market for execution. We report every phase of the order routing to you. A time stamp of the order receipt, the time the order was sent to the market and the time the order was reported back as executed, will be shown to you on the order status screen.
However, reducing costs alone will not make us successful. We must also generate revenues, and we do that in four primary ways.
The traditional interest income system: loaning customers funds against securities in a margin account.
Market Makers and Specialists that execute trades may pay us for the order flow. This system of payment got started because execution facilities were not efficient, and the size of the market had gotten larger. This payment used to average $9.00 per order for us at Ameritrade and was instrumental in helping us reduce our costs to customers. In fact, without it, commissions would not have come as low as they are. However, as the markets have become more efficient and competitive, this revenue source has been reduced dramatically. In fact, for the last several quarters it has been as low as $1.50 per trade.
In the year 2000, the industry may gravitate to decimal pricing. If and when that happens, spreads on quotes may narrow, and this revenue source may continue to go down and disappear. Hopefully, by that time our other revenue sources will be large enough for Freetrade.com to survive.
We will sell advertising on our website. This is a good way to let the advertisers pay for your commissions. However, we will not sell your name and address or any information about your personal account to anyone. We will absolutely maintain your privacy. We will describe demographic and cyclographic information on our customer base to advertisers but will maintain the privacy of your account.
Payment for market information flow. It is your activity, our customers' activity, that provides the execution destination with the information to establish the Bid and Ask quotes. Quote vendors then charge for this information. We think that this is more than an economic indiscretion. When their payments were started years ago, the idea was to cover costs. However, currently these execution destinations reap revenues of hundreds of millions of dollars due to the increased size of the market. Also, the quote charges are biased against the electronic customer since you -- the investor -- provide the information for these quotes. You should not have to pay a high price or be subject to discrimination.
This is a new and controversial activity, but we will push for it for the benefit of our customers.
Hopefully, with our reduced costs of operations and our limited revenue sources, we will be able to make a profit and survive. With your endorsement and help we may be able to thrive." |
