Online brokerage houses

A report in 1996 stated that investors had opened 1.5 million online accounts, about twice as many as analysts had projected just two years before, and it was estimated that by 2001, the number of online accounts will soar to 10 million. The primary reason for this increase was price. If an investor buys 500 shares of a $50 stock, he or she pays about $425 in commissions at a fullservice broker, or about $155 at a discount broker. By making the same trade electronically with a discount broker through a direct dialup connection, and the investor pays only about $35. If the investor is willing to go through a World Wide Web site, the cost can be as little as $12. Another reason for the increase is convenience. If the investor uses a fullservice broker, he or she usually must call during office hours to make a trade. With online trading, the investor can check his or her holdings and enter an order any time of day or night. When the investor's instructions have been executed by the broker's computer, the investor gets an e

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take up 60 percent of the discount market and 10 percent of all retail stock commissions. This shows the competitive strength of online trading, for the growth of online trading has come at the expense of traditional fullservice firms such as Merrill Lynch & Co. and PaineWebber Group, Inc. These companies are in a difficult position because they risk alienating their brokers if they move into online trading (Deck and Ouellette 1). There has been much excitement over online trading, and this has helped fuel a general movement on the part of financial institutions and consumers to tap the Internet to offer and access the whole range of financial servicesincluding checking, money market, and mutual fund accounts, as well as mortgages. This would be the goal of onestop shopping that banks have been trying to reach for years. Online banking also is fueling the breakup of the old supply and service chain, which cuts out traditional middlemen. Online trading is increasing faster than other types of online banking service, and Julio Gomez of Gomez Advisors, an online trading consultancy in Concord, Massachusetts, explains why: With other types of services, you can order a product online but have to wait for the physical produc
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Approximate Word count = 1336
Approximate Pages = 5 (250 words per page)

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