Free internet trading.We all knew it was only a matter of time.
"Copyright c 1997 Nando.net
Copyright c 1997 The Financial Times
(Jan 11, 1997 00:24 a.m. EST) -- Now equities can be traded for free on the Internet. A small Florida broker has begun
waiving commission for investors in a move that demonstrates the efficiency of electronic securities trading and
highlights the growing threat to traditional brokers.
The move by Empire Financial Group, a retail broker with 24 employees, undercuts the $9 per transaction charged by
the cheapest of its rivals on the Internet and the 1 or 2 percent commission typically charged by mainstream brokers.
Empire has imposed some conditions: clients must have a balance of at least $10,000 and funds sufficient for the deal,
and must buy at least 1,000 shares worth at least $5,000 to escape commission.
By requiring clients be in credit, Empire reduces the clerical costs of settling their accounts. The company expects to
achieve further savings by providing confirmation of transactions over the Internet rather than by post.
Empire says only about 12 percent of current transactions would qualify for the exemption, but it expects to generate
revenues by selling mutual funds and managing money for clients attracted by its offer of free share trading.
"Equity trading is going to be a loss-leader in the future," said Kevin Gagne, president of Empire. "That is where things
are going. Instead of playing catch-up at $9 a trade, I decided: let's have the others chase us."
Empire, a seven-year-old company with 10,000 customers, is a new and little-known entrant into Internet broking, and
the viability of its business model is unproven. But its initiative highlights the growing impact of information
technology on stockbroking.
ETrade Group, the largest online discount brokerage, has reduced commission to a flat $14.95 for purchases or sales
of 5,000 shares or fewer. Datek Securities undercut that with commission of $9.99 per 5,000 shares transacted.
Executives at "full-service" brokers, which both fulfil orders and give advice, warn that unsophisticated investors may
be lured by the ease of online broking into making rash investments." |
