Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.
By PATRICK McGEEHAN
few years ago, the chairman of
Ameritrade Holdings said the price
war among online brokerage companies might eventually drive trading
commissions to less than zero. To
undercut Ameritrade's latest discount, competitors will have to go
that low.
This week, Ameritrade, the sixth-biggest electronic brokerage company, introduced a completely electronic trading service that pledges not to charge any commissions on orders to buy or sell stocks at market prices. The bare-bones operation, called freetrade.com, expects to make money from interest on loans to investors, from payments it gets from other companies for sending trades their way and from selling ad space on its Web site.
"The Internet is all about freedom and free," said J. Joe Ricketts, Ameritrade's chairman and co-chief executive. "Some of our competitors have started to offer certain types of trades free. This is just a continuing evolution."
American Express is the only big financial company that is giving away stock trades. That offer, which was widely mocked by American Express's competitors, is viewed as a lure to attract wealthy customers to use the company's other services.
In some ways, freetrade.com is the anti-Ameritrade. Like its rival, the E*Trade Group, Ameritrade has pumped huge sums into a national ad campaign, wiping out virtually all of its operating profits. That approach has created a following for a character in the commercials who is called Stuart, a punkish youth with a fetish for trading. He peppers his appearances in the Ameritrade commercials with exhortations like "Let's light this candle."
Ameritrade, which earned $3 million last quarter, plans to spend about $200 million on advertising this year. "If you turn off your advertising, you'll die," Mr. Ricketts said. "Those big budgets will always be there."
In contrast, freetrade.com will not advertise or promote itself much at all, he said. Indeed, the only announcement of its existence was made on Ameritrade's Web site.
The stealthy start-up puzzled analysts who worry that Ameritrade's existing customers will exercise their freedom to switch from paying $8 to place an online trade through Ameritrade to paying nothing to place the same trade through its new sister company.
Scott Appleby, an analyst with Robertson Stephens in San Francisco, called the venture an experiment. "They would do this because they think this is where the market will go eventually," said Mr. Appleby, who has followed Ameritrade for a few years but was not aware of freetrade .com until a reporter asked about it.
Amy Butte, an analyst with Bear, Stearns, said: "This, to me, is unbelievable because it shows how desperate these companies are, that they are willing to cannibalize their own business to build account growth. I don't think the competition is on price any more. I think the competition is on technology."
Electronic brokerage companies are taking extreme measures to hold the most active stock traders because they are so much more profitable.
Ms. Butte estimated that "semiprofessional" traders make up less than 1 percent of the customers at online brokerages but account for 75 percent of all trades.
Charles Schwab , the longtime industry leader and trendsetter, made a statement about the importance of the most active traders earlier this year when it agreed to buy CyBerCorp, a small company that provides individual traders direct access to electronic stock exchanges.
Freetrade.com was designed to appeal to experienced online traders who will not mind that they cannot visit or call their brokerage company. Their only means of communicating with the company will be by e-mail messages.
"It's not something that everyone
is going to find attractive," Mr. Ricketts said. "There will be some people
from Ameritrade who move, and
some who won't."
Margin accounts are the lifeblood. [Clue]
I've gotten myself down to $4.95 a trade on E*Trade. Now I can go broke for free!!!!
Check out http://www.rjt.com ... they charge $5 a trade market, LIMIT or STOP. Freetrade appears to only offer market orders. That is an invitation to get robbed blind by the market makers.
$4.95? I'm charged either $14.95 or $19.95 at E*trade. How do you get this low rate?
Only market orders???? Why not let a market maker live here rent-free? Thanks for pointing that out.
Power E*TRADE (I don't really make enough trades/quarter - but then my joke would not have been so funny.)
Be careful with stretching the truth. You may catch up with Bill (or Algore) someday. Well, maybe not. You would have to live to be 1000 years old to tell enough lies to be in their league.
Have you heard anything about ken5050's "Stock Market Contest" results? Just tried a search and came up with nothing.
As a Financial Consultant for a Bank in Washington, you're absolutely correct. High interest margin rates, rapid dailiy trading, massive leveraging, no diversification, high stakes trades, lack of discipline and all the disinformation the web has to offer is financially killing more people than the media will admit.
The end result will be severe, sorry if people don't want to hear the truth.
Amy Butte, an analyst with Bear, Stearns, said: "This, to me, is unbelievable because it shows how desperate these companies are, that they are willing to cannibalize their own business to build account growth. I don't think the competition is on price any more. I think the competition is on technology."
Ha ha ha! Don't you just love these gougers--who in the good old days before online trading made $300 commissions--hide the quaking in their boots with deep "concern" for their current competitors? No, my dear Ms. Butt (sp on purpose). It is YOU who will be cannibalized! You are getting killed now with $8 trades and with free trades you will be utterly cleaned out. I LOOOVVVVVVVE IT!!!!!!
Oh and by the way, Ms. Butte, if the competition is now on the basis of technology and not price why would THAT give anyone a reason to come to YOU?! Hmmmmmm?
Hmm... you were right. How many people do you know who are grumbling about how much they lost?
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.
[
Top
|
Latest Posts
|
Latest Articles
|
Self Search
|
Add Bookmark
|
Post
|
Abuse
|
Help!
]
FreeRepublic , LLC, PO BOX 9771, FRESNO, CA 93794 Forum Version 2.0a Copyright © 1999 Free Republic, LLC |