The choice is yours
CyberTrader modifies commission plan
By JEFF PONCZAK
CyberTrader became the latest player in the online brokerage’s game of “Can you top this?” as the direct-access firm announced a new pricing schedule in late August.
The plan allows clients using CyberTrader Pro — the company’s most advanced trading platform — to choose either a per-trade or per-share commission. Certain low-volume trades could cost a trader as little as $1.
“Active traders have all kinds of strategies and techniques, but we realized our pricing didn’t reflect that,” says Andy Gill, senior vice president of Schwab’s Active Trader enterprise.
The flat-rate plan allows any trade up to 5,000 shares to be made for $9.95. After 5,000 shares, a $0.003/share fee is tacked on. The per-share plan charges $0.006/ share for the first 2,000 shares and $0.003/share for each share after that. With the per-share plan, a 100-share trade costs $1.
CyberTrader is also eliminating ECN and exchange fees, which the company says can save a trader as much as $25 on a 5,000-share order. Additionally, commissions on all options trades have been reduced to $9.95 plus $1/contract.
“We have watched our competitors to understand what they are doing,” Gill says. “But these moves are based on what our customers tell us. We had low prices, but we didn’t have pricing for every strategy. That’s the feedback we got.”
Gill says whatever loss in commission revenue CyberTrader might suffer, lowered fees could be made up by an increase in trading frequency. The firm wouldn’t make the move if it weren’t good for revenue, he added.
And, according to Gill, advances in technology have helped greatly reduce what it costs firms to execute a trade, allowing them to charge a fraction of what they charged a few years ago.
“Technology developments and processes continue to drive costs out of the system,” he says. “That allows us to pass the savings along to the clients.”
In recent months CyberTrader has seen competition from not just leading direct-access firms but also more “traditional” online brokers such as E*Trade and Fidelity. Although the definition of an “active trader” varies between firms, it is a highly-coveted segment of the trading population.
“I doubt you’ll see many more firms jump into the mix,” Gill says. “I think there will be some clear winners in the segment. Firms that focus on clients and balance price with tools and customer service will come out on top.”
In other CyberTrader news, Schwab — CyberTrader’s parent company — has had a rough few months, beginning with the resignation of CEO David Pottruck in mid-July. The stock, which once traded above $50, has been below $10 since May, and Schwab announced earlier in August it was closing 53 branches in a cost-cutting measure.
On Sept. 1, Schwab sold its Capital Markets unit — the division that handles research and institutional investments — to UBS for $265 million. Gill, however, says CyberTrader is safe.
“(Schwab) is very committed to CyberTrader,” Gill says. “The best proof of that is Schwab’s (direct-access program) StreetSmartPro. Schwab took CyberTrader technology and brought it to Schwab.” |
