On Barrons-possibly JBOH one of 70 who did not provide Barron's with an account to test OR market share too small yet. See article. The on-line broker sector getting Barron's front page is good news for all stocks in this sector. Keep that publicity coming! Hot sector in l999. Holding long.... Patherzen
March 15, 1999
Growing Pains
In ranking online brokers, service and reliability count for a lot
By Theresa W. Carey
How hot is online stock trading? Forget that it accounted for about 30% of the transactions by individual investors at the end of 1998, up from a barely measurable percentage when Barron's first ranked online brokers three years ago. Or that by early this year, some 340,000 online trades were being made every day, fully one-third more than last fall. Forget, too, that shares of Donaldson Lufkin & Jenrette jumped 9% one day last week on chatter that it would spin off its online brokerage unit.
Rating the online brokers How the online brokers stack up
No, numbers don't tell the story. A better indicator of the power of electronic trading is that employers are beginning to cut off their workers' access to online brokers in the office. It seems that keeping tabs on one's personal portfolio has supplanted solitaire as a major time-waster at work. As one of the hundreds of Barron's readers who responded to our invitation to share their experiences with online brokers put it, "What's the use of going to work if I can't watch my stocks?"
Sad to say, with the burgeoning popularity of online trading have come some well-publicized problems. Quite a few of our respondents expressed annoyance at the slowdowns and interruptions in service that they have been forced to endure over the past few months of hectic market activity. Scott Alber, a customer of both E*Trade and Brown & Co., fears that a complete system breakdown could lead to panic: "What irritates me is the online trading firms' inability to handle current customers while at the same time incessantly advertising for more customers."
To protect themselves, Barron's readers are spreading their bets. Approximately 40% of the respondents said they had accounts with more than one online broker. "I think a consumer needs several active accounts," says Donna Massaria, an online trader from New York. "Until brokers make the investments necessary to produce totally reliable sites, consumers will have to use many brokers."
Regulators, not surprisingly, have gotten into the act. Online trading is drawing increased scrutiny from the Securities and Exchange Commission, which is worried about the influx of inexperienced day traders, some of whose get-rich-quick dreams have turned into get-poor-quicker realities. As Jonathan Hoenig, a 23-year-old from Chicago, describes it: "All these Monday-night football guys are playing gunslinger with their IRAs. Online execution is wonderful, but a lot of stupid investors are going to get hurt, and the discount brokerages are nothing more than casinos."
To counter that perception and stave off increased government oversight, the industry is pushing increased self-policing. While online brokers make it easy to open accounts and day-trade, they're also starting to tighten up on margin requirements for the most volatile stocks, and forcing traders to trade such stocks with a real, live human broker. Some online brokers that offer IPOs require customers to put an upper limit on the price they will pay for a newly issued stock. That way, investors can avoid anteing a surprise $75 price for a stock that was expected to open at $20. But the brokers can't outlaw stupid trading decisions, which can happen whether a customer is paying $15 or $150 in commissions.
Commissions, moreover, appear to have hit bottom. CS First Boston's Bill Burnham calculates the average commission at the top 10 online brokers is $15.75, which is down just 20 cents from its level a year ago. Instead of cutting prices further, the online brokers have concentrated on upgrading their offerings, with site redesigns, added backup servers, enhanced capacity planning and additional stock research.
Commissions have fallen to the extent that they are no longer a primary consideration, and we have adjusted our ratings accordingly. A trade of 100 shares of a $100 stock is a $10,000 transaction, so the difference between a $10 and $20 commission is relatively unimportant. That is unless you're a hyper day trader, which we assume doesn't describe the typical Barron's reader.
So we have added weight to the scores we give brokers for trade execution, reliability and range of offerings. We ranked 21 online brokers, which were chosen based on their share of the market, genuine reader requests (we ignored the spam), and overall presence in the market. We set up accounts with each broker and made trades. We also interviewed dozens of brokers and their customers, and scoured the hundreds of E-mails from readers. Still, there are about 70 online brokers not ranked here, and they were left off either because they didn't provide us with an account for testing their site, or because their market share is too small.
March 15, 1999
Growing Pains
In ranking online brokers, service and reliability count for a lot
By Theresa W. Carey
How hot is online stock trading? Forget that it accounted for about 30% of the transactions by individual investors at the end of 1998, up from a barely measurable percentage when Barron's first ranked online brokers three years ago. Or that by early this year, some 340,000 online trades were being made every day, fully one-third more than last fall. Forget, too, that shares of Donaldson Lufkin & Jenrette jumped 9% one day last week on chatter that it would spin off its online brokerage unit.
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Rating the online brokers How the online brokers stack up
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No, numbers don't tell the story. A better indicator of the power of electronic trading is that employers are beginning to cut off their workers' access to online brokers in the office. It seems that keeping tabs on one's personal portfolio has supplanted solitaire as a major time-waster at work. As one of the hundreds of Barron's readers who responded to our invitation to share their experiences with online brokers put it, "What's the use of going to work if I can't watch my stocks?"
Sad to say, with the burgeoning popularity of online trading have come some well-publicized problems. Quite a few of our respondents expressed annoyance at the slowdowns and interruptions in service that they have been forced to endure over the past few months of hectic market activity. Scott Alber, a customer of both E*Trade and Brown & Co., fears that a complete system breakdown could lead to panic: "What irritates me is the online trading firms' inability to handle current customers while at the same time incessantly advertising for more customers."
To protect themselves, Barron's readers are spreading their bets. Approximately 40% of the respondents said they had accounts with more than one online broker. "I think a consumer needs several active accounts," says Donna Massaria, an online trader from New York. "Until brokers make the investments necessary to produce totally reliable sites, consumers will have to use many brokers."
Regulators, not surprisingly, have gotten into the act. Online trading is drawing increased scrutiny from the Securities and Exchange Commission, which is worried about the influx of inexperienced day traders, some of whose get-rich-quick dreams have turned into get-poor-quicker realities. As Jonathan Hoenig, a 23-year-old from Chicago, describes it: "All these Monday-night football guys are playing gunslinger with their IRAs. Online execution is wonderful, but a lot of stupid investors are going to get hurt, and the discount brokerages are nothing more than casinos."
To counter that perception and stave off increased government oversight, the industry is pushing increased self-policing. While online brokers make it easy to open accounts and day-trade, they're also starting to tighten up on margin requirements for the most volatile stocks, and forcing traders to trade such stocks with a real, live human broker. Some online brokers that offer IPOs require customers to put an upper limit on the price they will pay for a newly issued stock. That way, investors can avoid anteing a surprise $75 price for a stock that was expected to open at $20. But the brokers can't outlaw stupid trading decisions, which can happen whether a customer is paying $15 or $150 in commissions.
Commissions, moreover, appear to have hit bottom. CS First Boston's Bill Burnham calculates the average commission at the top 10 online brokers is $15.75, which is down just 20 cents from its level a year ago. Instead of cutting prices further, the online brokers have concentrated on upgrading their offerings, with site redesigns, added backup servers, enhanced capacity planning and additional stock research.
Commissions have fallen to the extent that they are no longer a primary consideration, and we have adjusted our ratings accordingly. A trade of 100 shares of a $100 stock is a $10,000 transaction, so the difference between a $10 and $20 commission is relatively unimportant. That is unless you're a hyper day trader, which we assume doesn't describe the typical Barron's reader.
So we have added weight to the scores we give brokers for trade execution, reliability and range of offerings. We ranked 21 online brokers, which were chosen based on their share of the market, genuine reader requests (we ignored the spam), and overall presence in the market. We set up accounts with each broker and made trades. We also interviewed dozens of brokers and their customers, and scoured the hundreds of E-mails from readers. Still, there are about 70 online brokers not ranked here, and they were left off either because they didn't provide us with an account for testing their site, or because their market share is too small.
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