Monday, March 27, 2006

Four Star Brokers

A MERCEDES-S OR A BMW-7 SERIES MIGHT CLAIM to be the world’s best sedan, but a Toyota Camry or Honda Accord might better suit your needs. So, too, with online brokers: In our recent annual rating (March 6 entry), the largest group of brokers scored four out of a possible five stars. Most excel in a specialty or two, but fall short in other areas. Yet your ideal broker may well be in this group. Here’s a look at some four-star contenders.

Browser-Based Brokers

Ameritrade’s Apex ( offering continues to develop in depth and breadth. A few years back, Ameritrade typically was at the bottom of our rankings due to a narrow breadth of offerings and a clumsy Website, but the company has listened to criticism and worked hard to overcome it. One welcome update this year is the ability to link accounts for reporting and performance-evaluation purposes. You can link multiple accounts if there’s an overlap in Social Security numbers; in the near future, it will be possible to link any ‘permissioned’ accounts, such as trusts and corporate accounts, that aren’t tied by SSN. Ameritrade offers plentiful customization tools. The customization specifications are stored on an Ameritrade server, so even when you log in from a different computer, you’ll get the view you want. As TD Waterhouse research offerings are integrated into the Ameritrade platform with the merger of the firms later this year, the site is apt to improve again.

Although it won’t exist as a separate entity a year from now, TD Waterhouse’s TradeCentral( offering managed to earn four stars. TradeCentral has a variety of tools available that rival those of some of the software-based brokers—but it runs in a browser, so it’s more portable. To use the platform, TradeCentral customers must trade 30 or more times in a rolling 90-day period, or have $500,000 in assets. They pay a flat fee of $9.95 for stock trades, and $1.25 extra per contract for options.

Fidelity ( improved its options capabilities by adding an Options Research window. The Strategy Evaluator lets you compare different strategies by entering a few characteristics pertaining to what you believe will happen to the underlying stock. The site offers a variety of investment-research opportunities, with many enhancements made to stock, option, bond, mutual-fund and exchange-traded-funds research for retail investors.

Fidelity also got a big kick up in the rankings from a significant commissions cut. We assume a typical Barron’s reader would be in the Silver category, which saw stock commissions drop to $10.95 per trade, and options commissions drop about 50%. The firm also eliminated its $50 annual fee and lowered margin rates, which makes it a much better deal now. There are still some glitches in the reporting arena, however, especially since account history can be viewed only in 90-day increments.

E*Trade’s ( Serious Investor offering, for those who park more than $50,000 in assets with the firm, also earned four stars. Many of the pages on E*Trade’s site now include slider bars, which allow you to change various assumptions quickly, such as risk and interest rate. Commissions have been slashed; the Serious Investor tier pays $9.99 for stocks, or $9.99 plus 75 cents per contract for options. The firm is folding a variety of Harrisdirect tools, such as Risk Metrics, into the site over the next few months, when the site will undergo another update.

E*Trade has worked to address customer-support issues, and has committed to expanding its physical presence in major metropolitan areas. An area of focus is aimed at picking up additional wealth-management firms to cater to high-net-worth customers. Michael Curcio, E*Trade Executive Vice President in charge of retail trading, says, “We’re seeing the demand for complex trading instruments grow. We’ve devoted more development and services to this area.”

Privately held Scottrade ( is unlikely to be swallowed up in the merger wave that has rolled through the industry. But that’s not what earned it four stars. The site underwent a serious overhaul just after our 2004 broker survey and now is considerably easier to navigate. It sports just four tabs for the main functional areas, while the old site had nine. Every resource is at most two clicks away. The home page shows all your important information in one place. “Customers like it,” says president Rodger Riney. “They don’t have to go digging around to find something like funds available for trading.” This page provides a quick, elegant look at what’s happening in the account. Gainskeeper’s tax reporting is fully integrated into the site, at no additional cost. One drawback for options traders is the inability to enter complex options orders online.

Software-Based Brokers

RushTrade (, a small firm that offers three variations on its trading platform, lets you create and execute trading strategies as well as basket orders. Direct Plus offers Level I quotes, a variety of charting functions, and real-time account management. The Direct Pro platform steps up to Level II quotes and additional charting functions, as well as the Market Matrix, which allows you to search the market for stocks to trade based on parameters you set. Although its routing algorithms give you terrific executions on stock transactions, the platforms don’t allow you to trade multileg options orders online.

ChoiceTrade ( also gives its customers the option to use the powerful BonTrade software platform, or a browser-based offering called ChoiceTrader Online. The browser version includes ChoiceStreamer, a relatively easy-to-use configurable interface. The ChoiceTrader Select platform, which links into an eSignal subscription with powerful charting and technical analysis capabilities, gives customers access to Credit Suisse’s algorithmic trading capabilities. Through the Select platform, customers can route orders to a new electronic communications network called BATS, ( Better Alternative Trading System).

A recently launched feature of the Select/BonTrade platform is the TradeScript Manager, an extremely flexible basket generator. A trader could have a long list of ideas queued up that are stored in the TradeScript window. Each order could be different: Some could be buys, some short sells, and some long sells to get out of previous positions. The TradeScript window will give the trader real-time data on each potential trade. You can launch orders simultaneously, or pick a few from the group and hit the Launch Selected button. It’s an intriguing feature for frequent traders, especially those who want to send a group of orders all at once.

Fidelity’s Active Trader also earns four stars. This platform has evolved in the last year with the introduction of OptionTrader Pro and the integration of Wealth-Lab Pro. The platform offers real-time streaming data, able to analyze and simulate potential orders, then route them to a variety of destinations. Fidelity pulled out the stops last year in an effort to appeal to frequent traders, and especially to options traders.

When viewing a quote window, if you right-click on a bid or ask, you can immediately execute an order, or choose to simulate the order. A simulated-trade ticket lets you experiment with a trade, mapping out the potential profit and loss in advance. If you set up a multileg position, the portfolio summary will show you all the possible effects on your current holdings. This can be used for any listed equity as well as indexes and the new CBOE (Chicago Board Options Exchange) weekly options. The Active Trader platform is developing into a terrific offering, backed by the rest of the Fidelity offerings. The setup is somewhat clumsy, however, and the pieces feel like they’re not yet fully integrated.

PreferredTrade ( was purchased by Fimat last July, which gave it access to worldwide stock, options and futures exchanges. We expect to see the company, now called Fimat Preferred, take advantage of international relationships now available. One update already in effect is an expansion of the futures-trading capability, including a cut in commissions.

The current version of the software is 6.2; Fimat Preferred expects to roll out version 7 later this year, which will include various Fimat Group futures, commodities and foreign-exchange products. The platform allows a trader to split up an option order and launch up to six options exchanges simultaneously, with the goal of extracting maximum liquidity from the market. It also provides streaming regional options quotes, allowing you to monitor all six options exchanges from a single window. Options commissions were cut recently, and those with over $5 million on account qualify for greater margin flexibility when trading U.S. equity-index options and exchange-traded funds.

Schwab’s CyberTrader ( rounds out our four-star list with a software platform tweaked to make it easier to use. You can now trade equities, options and futures from a single platform. The Options Wizard lets clients express in English what they’re interested in doing, such as generate income, hedge a position, or create a calendar spread or a debit spread. The Wizard spells out what the client has to do to place the appropriate trade.

The Strategy Center scans the entire market to find equities that meet criteria that you’ve laid out. This feature goes a few steps beyond backtesting to help you find equities to trade. Our biggest problem with CyberTrader is you have to trade at a very high rate to dodge the platform fees. CyberTrader offers either per-share or per-trade commission structures, but the monthly fee is much higher if you opt for the per-share structure.

WE’LL COVER ONLINE BROKERS that scored less than four stars in a future column.

Published in Barron’s, March 27, 2006

Posted by twcarey on 03/27 at 12:39 PM
Published in Barron'sAnnual Broker Review • (0) CommentsPermalink