Online Stock Trades Account for 17% of Retail Business in 1997
New York, Feb. 25 (Bloomberg) -- Trades made by individuals
over personal computers accounted for 17 percent of all buy and
sell orders in the U.S. last year, according to a study by
Minneapolis-based brokerage firm Piper Jaffray Inc.
So-called online brokerage accounts more than doubled their
share of total retail transactions last year, analyst Bill
Burnham wrote in a report to clients. In the fourth quarter,
online trading generated an average 153,000 trades per day, up 60
percent from a year earlier.
Online investing, which requires a personal computer and a
modem, lets investors place their bets electronically with a
broker at any time of day and at lower commission costs than over
the phone.
''Discount brokerages' best customers are demanding online
trading,'' said Julio Gomez, president of Gomez Advisors, a
Boston-based consulting firm to online brokerages.
Gomez said there are currently 3 million online accounts, up
from about 2.5 million at the end of 1997. He said new accounts
are growing at a rate of 50 percent to 75 percent annually and
online traders typically double their business when they switch
from telephone to computer.
Part of the reason for the increased activity is the low
cost of trading online, analysts said. An investor who sells 100
shares of a $20 stock at the market price through Merrill Lynch &
Co. would pay between $50 and $70, depending on the size of the
account and the length of the client's relationship with the
broker. The same trade through AmeriTrade Holdings Corp.'s online
brokerage would cost $8.
To be sure, computer trading doesn't mean faster execution
than placing an order with a professional broker or sales
representative by telephone. Still, that hasn't deterred investors from
trading online.
''Online trading had a blow-out year in 1997,'' wrote
Burnham, who was unavailable for comment. ''With all of the
activity around banking services, international expansion and
consolidation, it looks like 1998 is going to be another wild
year.''
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