Saturday, November 20, 2010
Online Brokers Eye One Another
IS ANOTHER WAVE OF broker consolidations rolling toward shore? In late October, Lightspeed Financial (lightspeed.com) completed its acquisition of Terra Nova Financial, bringing its active-trading client base to over 8,500 accounts. That doesn’t sound like much, but those accounts are trading at a very rapid pace—over 220 million equity shares a day.
Rumors have come and gone for years about a link between E*Trade (etrade.com) and TD Ameritrade (tdameritrade.com). Most recently, reports that Charles Schwab (schwab.com) is an E*Trade suitor generated a bump in E*Trade’s stock price. The two firms declined to comment. With trading off earlier in the year, there’s bound to be more pressure to acquire.
A Securities and Exchange Commission filing in early November detailed an investment made by Thomas Peterffy, CEO of Interactive (interactivebrokers.com) in rival TradeStation (tradestation.com). Peterffy purchased nearly 2.6 million shares of TradeStation stock, or 6.3% of the outstanding shares.
To me, this appears to be an unlikely marriage. Though both Interactive Brokers and TradeStation appeal to active traders, their platforms are extremely different. TradeStation, which recently launched version 9.0 of its platform ("What’s New at Online Brokers?” Oct. 30), is designed for traders who want to build their own trading systems based on backtesting of data. Interactive Brokers is clearly aimed at traders interested in minimizing their costs; their platform isn’t as pretty as TradeStation’s.
There are similarities, though. Both firms have extensive connections to international markets, and both have very efficient order-routing technology as well as the ability to construct extremely complex orders. Both platforms are downloadable software programs, as opposed to Websites where you sign in. Both companies are run by people I consider market visionaries, though their visions differ considerably.
Does this stock purchase herald a hostile takeover? Neither Interactive Brokers nor TradeStation would comment. Peterffy’s filing says the shares were bought for “investment purposes.” The filing also says, once the legalese is translated to English, that Peterffy reserves the right to consider strategic alternatives with TradeStation and other parties. We will keep you up to date.
FIDELITY INVESTMENTS (fidelity.com) conducted a poll in late September that shows that approximately one-third of its actively trading customers are optimistic about the domestic markets, believing the S&P 500 will gain another 100 points, or 8%,by year end. About half expect the index to remain stable.
“This is our sixth poll of active investors in the past 18 months, and during that time they have been bullish in their market outlook, and the market has generally met their expectations,” says James C. Burton, president of Fidelity’s retail brokerage unit. “This most recent poll finds active investors even more positive than they have been in the past; from expectations of higher personal returns to a renewed confidence in equities, they are re-engaged and repositioning their portfolios accordingly.”
Fidelity’s retail brokerage clients have increased their new investments into individual equities 14% year-over-year through September. Options trading at Fidelity increased 11% in that time.
Owing to increased interest in tangible assets, Fidelity recently rolled out a new precious-metals investment page, at http://www.fidelity.com/metals. The page includes information about precious-metals trading opportunities, direct telephone access to Fidelity precious-metal specialists and storage and insurance options.
I’VE DOWNLOADED A COUPLE of enjoyable iPad apps recently, including Thomson Reuters MarketBoard 1.3 (free) and StockWatch–iPad Edition ($5.99).
StockWatch has had an iPhone version since 2008; in early November it published an iPad-specific version. You can sync your watch lists and portfolios between devices, and track an unlimited number of stocks, bonds, mutual funds, futures and options. It even lets you track tax lots and add notes.
I like the full-screen technical charting capability and the news feeds. My only gripe is that the data feed comes from Yahoo Finance, so it’s delayed by 15 minutes. If there was a way to get real-time data into this app, it would be even more useful.
Thomson Reuters MarketBoard is especially useful for subscribers to the Thomson ONE service, but even if you aren’t don’t, it lets you pick up news and SEC filings on the companies you want to follow. The display is crisp and nicely laid out. Well worth picking up, especially since it’s free.
Published in Barron’s, November 15, 2010.
Saturday, November 06, 2010
What's New at Online Brokers?
Defying the recent slump in stock trading, TradeStation and optionsXpress launch upgraded systems.
STOCK-TRADING VOLUME may have dropped in the second and third quarters, but that hasn’t prevented online brokers like TradeStation and optionsXpress from upgrading their offerings.
TradeStation (tradestation.com) recently gave us a peek at its updated TradeStation 9.0, which includes a new look and feel for the program. This brokerage firm is aimed at high-volume, professional traders who want to build their own systems, and take advantage of the historical database available for testing strategies. According to Janette Perez, vice president of strategic relations, many of the firm’s customers feel that they are competing with algorithmic and “black box” traders for profits, and therefore must be able to react quickly to the market. Perez says, “This release puts us far ahead in differentiating TradeStation from the rest of the pack.” Barron’s gave TradeStation four of a possible five stars in its 2010 ranking of the Best Online Brokers ("Newest Trading Play,” March 15).
Version 9.0’s opening screen features redesigned icons and links that take you directly to help and customer support. The help functionality was considerably less obvious in previous versions. There is also a “Quick Start” wizard that helps new customers figure out how to optimize the busy TradeStation environment.
The major strength of the TradeStation (ticker: TRAD) platform is the ability to build and test trading strategies–to create your own “black box.” Traders can monitor market depth and be alerted, or generate a trade, when a rule or trigger is met. The platform can perform risk assessments on open positions and execute transactions for you during fast upturns or downturns.
The upgrade succeeds in making it easier to find some of the platform’s tools, and expands its data analysis range to include market depth, among other things. EasyLanguage, which customers use to develop their trading systems, was extended in the new version, and the firm is hosting the TradeStation 9.0 Developer Challenge, a competition designed to recognize independently developed analysis techniques. EasyLanguage provides the building blocks for customers and developers to automate and test strategies in the equities, options, futures and foreign-exchange markets.
Perez says that the Plantation, Fla.-based firm has held three conferences for developers, who are writing add-ons to the platform that traders can utilize. More than 400 developers have more than 550 products available, such as trading algorithms and charting enhancements, says Perez.
This is a downloadable application that you install on each computer you’ll use for trading. It only runs on Windows operating systems, and a high-speed broadband connection to the Internet is highly recommended. Multiple monitors let you keep track of several different TradeStation functions simultaneously.
Casual traders and buy-and-hold investors shouldn’t consider opening a TradeStation account. There is just too much technology, and you have to pay for it if you don’t trade at a relatively high volume. The platform fee is $99.95 per month unless you trade a minimum of 5,000 shares of stock, 50 options contracts, 10 round-turn foreign-exchange lots or 10 round-turn futures or futures-options contracts. If you keep a $1 million balance, regardless of how much trading you do, the platform fee is waived.
The commission structure is pretty complicated; for equities, you can choose between a flat-fee per trade that ranges from $6.99 to $9.99, or pay a per-share fee of one cent for the first 500 shares and 0.6 cent for every share after that. The orders are routed differently depending on which commission structure you select. (Details are at http://www.tradestation.com/brokerage/commissions.shtm.)
The firm is rebating up to $500 of commissions for trades placed this year in new accounts opened and funded by Nov. 15.
OPTIONSXPRESS (optionsxpress.com) has added tab and grid views to its Streaming Charts functionality, which let you monitor multiple graphs simultaneously. If you choose “Tab,” then each ticker symbol on your watch list gets loaded into a full-size chart; to move between charts, you click on the ticker symbol in the tab. If you choose “Grid,” up to 16 charts per page can be displayed.
Streaming Charts can be set up for equities, options or futures. The charts update in real-time, and all associated technical studies are also updated. You can detach a chart from the main page, which is a function that is greatly enhanced by having two monitors–or more. Over 100 customizable studies can be added on charts, and the resulting charts can be saved or shared.
Streaming Charts is part of an upgrade to the entire site that also includes an optionsXpress (OXPS) extension for Google Chrome. The upgrade includes the integration of “Greeks” into the trade and probability calculator that helps traders figure desired entry and exit points faster. These are all features that help options traders make better decisions.
A FOREIGN FACEBOOK: Currensee (http://www.currensee.com) enables foreign-exchange traders to discuss their trades and monitor each other’s successes (and failures). Launched in fall 2009, Currensee says that traders from over 130 countries have linked their live brokerage accounts with one of more than 100 brokers supported by the platform. Members of this social network can see one another’s actual trades and share strategies in real time. The site also generates a variety of social indicators based on aggregated data to help figure out what does and doesn’t work.
The most recent addition to the site is the Currensee Trade Leaders Program, an automated service that enables investors to follow and, if they like, execute the trades put on by those rated most successful. The leaders are chosen from the more than 7,000 current members of the network, and are screened for historical performance, risk management and returns compared with the S&P 500. Investors can choose to track one or more leaders, and either mirror their trades on their own or automatically place the trades through the platform. Currensee assesses each Trade Leader’s background, controls and skills prior to giving them the designation.
You can view community sentiment and trading volume for a wide range of trading pairs. Your “Trading Friends’” open and closed positions are displayed on your positions table. It’s an interesting take on a type of trading that appears to be gaining in popularity.
Published in Barron’s, November 1, 2010.