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Non-Tech : E*Trade (NYSE:ET) -- Ignore unavailable to you. Want to Upgrade?

To: Conano who wrote (6138)	4/20/1999 9:32:00 PM
From: Conano	Respond to of 13953

Oops...I meant to say that I bought 100 EGRP @ 80-- not 90-- phew! Conan

To: Conano who wrote (6138)	4/20/1999 10:28:00 PM
From: ecommerceman	Read Replies (3) \| Respond to of 13953

For all the crap that ETrade takes on this thread from time to time (are you listening, DD?), I thought it was worth directing folks attention to the following article, which shows that ETrade customers are dealt with very fairly on their non-invested cash: For Some Online Brokers, Uninvested Funds Can Be of Little Interest By Elizabeth Roy Senior Writer Online brokers may charge bargain-basement commissions, but some are also skimping on the interest they pay clients on uninvested funds. Of the nine biggest online brokers, three -- Datek, Fidelity and Ameritrade (Nasdaq:AMTD - news) -- pay significantly below-market taxable interest rates on uninvested cash. Two other Net brokers -- Chase Manhattan Bank's (NYSE:CMB - news) Brown & Co. and Fleet Financial's (NYSE:FLT - news) Suretrade -- also pay substantially below-market rates on idle cash. The rest of the biggest Internet brokers -- Schwab (NYSE:SCH - news) , Toronto Dominion's (NYSE:TD - news) Waterhouse, E*Trade (Nasdaq:EGRP - news) , Donaldson Lufkin & Jenrette's (NYSE:DLJ - news) DLJdirect, Quick & Reilly, also owned by Fleet, and Morgan Stanley Dean Witter's (NYSE:MWD - news) Discover Brokerage Direct -- follow the full-service model of automatically sweeping uninvested cash into a money-market fund, where it earns a market rate. These brokers offer both taxable and tax-free money-market funds, giving high-tax-bracket investors the opportunity to earn tax-free income. (Fidelity will sweep free cash into a tax-free money-market fund, but investors who are taxed at too low a rate to benefit from a tax-exempt yield can't have cash swept into a taxable money-market fund, even though Fidelity runs one. They can invest in the taxable fund, but they have to give instructions to buy shares.) Why do they do it? For profit. Brokerage firms pocket the spread between the interest they earn on margin loans and the interest they pay on idle cash, explains Greg Smith, an analyst at Putnam Lovell de Guardiola & Thornton. So the more they charge for margin loans and the less they pay on cash, the bigger the spread. "Interest income is a large earnings engine for these online brokers, especially if they're self-clearing," Smith says. Self-clearing broker-dealers record on their own balance sheets customer receivables from margin loans and amounts payable to customers for cash balances. "If they're not sweeping into a money-market fund and paying a below-market rate, they're probably making a nice spread on that," Smith says. For Ameritrade, he notes in a recent report, net interest income has accounted for 25% to 30% of net revenue in recent quarters. Those nice spreads help the brokers keep their commissions in check. Beth Basilio, a spokeswoman for Dreyfus, whose online brokerage unit pays a below-market fixed rate on free cash, says: "The reason we do this is that it helps to support our low commission rate, which is something our customers are sensitive to, and we are sensitive to our customers' needs." What difference does the rate paid on idle cash matter? A cash balance of $5,000, invested in the average money-market fund, which returned 5.04% last year according to Ashland, Mass.-based IBC Financial Data, would have generated $257.90 of income. The same balance in a Datek or a Dreyfus account, where uninvested cash earns a fixed rate of 3.5%, would have generated $177.85. At Fidelity, where the rates on cash vary with the amount (starting with a paltry 0.949% on amounts up to $1,000), a $5,000 balance would've generated $170.50, based on a rate of 3.358%. At Brown, which pays 2.25%, the balance would have earned $113.65."