Saturday, January 28, 2012
E*Trade Expands E*Arsenal
The discount broker adds mobile banking app and readies revamped Website. Plus, Interactive Brokers’ improved research and Just2Trade jumps into bonds.
E*Trade Financial is still nursing the bruises its banking operation received in the mortgage crisis. Its focus these days is on discount brokerage, where the firm wants to persuade customers that it isn’t just a place to trade, but a place to invest, CEO Steven Freiberg told us recently.
The former Citigroup exec, who was named to the top spot in 2010 and last year became interim chairman, too, noted that Schwab customers hold, on average, 35% of their assets in their accounts, while E*Trade clients tend to hold just 12%. To help improve that figure, E*Trade (ticker: ETFC) will shortly revamp its Website to allow for more personalized use. “Consumers,” Freiberg says, “want to feel smart, but the experience has to be simple.” The new site will be called MyTrade360 and will gradually learn a user’s behavior, making the features that an investor uses most often more readily available.
Before MyTrade360 arrives, E*Trade is adding some other new services. Following close behind pioneers Chase Bank and Fidelity, it is entering the world of mobile deposits for banking or brokerage accounts. Clients with iPhones can now deposit checks using a mobile app, E*Trade Mobile Pro. Previously, a customer had to deposit a check at an E*Trade branch, or mail it and wait until it was processed.
The depositor simply uses the iPhone’s camera to photograph the front and back of a paper check. Then, she launches E*Trade Mobile Pro, available in Apple’s App Store, enters the amount of the check and uploads the images. The funds are made available in one or two days. You are advised to hang onto the check for a few days until you get a message from E*Trade (http://www.etrade.com) verifying the deposit. Don’t despair, Android users—E*Trade plans to give you mobile deposit capability during the early part of 2012.
THE E*TRADE APP, and others like it, owe their existence to changes in banking rules passed back in 2003 that allowed electronic processing at banks. The technology has caught up, which is why bank ATMs have begun to process checks without requiring envelopes or deposit slips. No more hunting for a pen. (You can learn more about the details at http://www.federalreserve.gov/paymentsystems/check21_faq.htm. It’s interesting reading. Really.)
Other changes are afoot at E*Trade. Freiberg says it plans to expand its market-making business, providing liquidity in certain stocks. The market-making business also puts E*Trade in the position of buying stock from, and selling stock to, its own customers. The price of the transaction must be at the national best bid or offer; market makers generate revenue through the difference between the bid and offer.
One thing E*Trade won’t be doing any time soon is selling itself, says Freiberg. He and the E*Trade board have been under pressure to improve shareholder value from big investors like hedge fund Citadel. E*Trade shares, adjusted for a reverse split, have fallen from a high of $277.60 in 2006 to $9.50 last week. Freiberg assures us that a sale is off the table for now. The Electronic Investor would love to see E*Trade solve its substantial problems with better trading and investment products. A better Website would be a good first step, albeit a small one.
WE’VE LONG CRITICIZED Interactive Brokers (http://www.interactivebrokers.com) for the paucity of its electronic-research amenities and portfolio analysis. The firm has made several improvements.
IB has launched IBIS, the Interactive Brokers Information System, which can be accessed from within its trading application, or as a stand-alone package. The Research Platform supplies real-time quotes, stock scanners, charts and alerts, risk analytics for your stock portfolio, as well as IB’s Daily Options Brief. For more power, add the Research Data Bundle or select individual subscriptions to Reuters Fundamentals, Reuters StreetEvents Calendars, Dow Jones Real Time News, Reuters Global Newswire or Dow Jones News Service.
IB customers who are active traders pay $39 a month for the basic bundle of services; more news and data feeds can be added as desired. (See ibis.interactivebrokers.com/ibis/pricing.php for pricing information.)
The electronic broker’s PortfolioAnalyst provides tools that show you what’s happening to your trades. The Attribution Report compares an account’s return to a selected index, such as the Standard & Poor’s 500, and explains the difference due to variations in sector ratings and returns within each sector. Many mutual-fund managers use a similar report to gauge performance.
Other features allow you to drill down into your portfolio’s risk factors, or analyze net performance over a specific period. The sector-allocation report displays a color-coded bar chart and table that illustrate the net asset value of stocks and options in your portfolio by sector for any day, month or quarter you choose.
Advisors and brokers who use IB as the trading platform for customer portfolios can set up client reports to be printed in a batch for easy distribution. These new reporting capabilities are extremely powerful, and very informative.
JUST2TRADE (http://www.just2trade.com), which recently updated its services ("Fidelity Polishes Its iPad App,” Dec. 5, 2011), has added bond trading, one of investors’ major sources of profit in the past few years. Powered by Knight BondPoint, which supplies bond-trading capabilities for several online brokers, Just2Trade allows customers to execute bond trades online for $2.50 per transaction. You can trade municipals, corporates, agencies, collateralized mortgage obligations and strips or zero-coupon bonds.
You get there by choosing Fixed Income Center from the Trading tab on the site’s main page. There isn’t (yet) a link to fixed-income research under the Research tab, but the landing page provides data about current offerings such as yield grids and current interest rates.
The search functions of the bond platform aren’t pretty, but they’re presented in a familiar layout. They allow access to new issues, and let investors set up a bond ladder. You’ll find detailed information on both primary and secondary fixed-income securities, including price, yield, maturity, credit ratings, and call protection. You can search the database of available bonds on any of those fields to find securities that will work in your portfolio, and save a search query for future use. Search results can be exported to Excel for further analysis.
Published in Barron’s, January 23, 2012.
Saturday, January 07, 2012
Lots of Goodies From Online Brokers
Schwab and TD Ameritrade and its thinkorswim unit all delivered gifts for traders in December. Including a quieter CNBC.
As 2011 turns to 2012, active traders at Schwab, TD Ameritrade and thinkorswim have been given a little added holiday cheer.
Launched last February, Charles Schwab’s (http://www.schwab.com) active-trading platform, StreetSmart Edge, was updated in mid-December. Kelli Keough, Schwab’s vice president of active trading, claims this upgrade is the most significant in satisfying client requests and enhancing workflow. New are screening tools, momentum monitors, updated charting tools and the ability to link an optionsXpress account into StreetSmart Edge. The downloadable application, featuring streaming charts, news and account data, is available to clients who trade more than 36 times in a 12-month period.
When viewing a price chart for a stock in StreetSmart Edge, you can see small tiles where you have an open position or open order. If you’ve got an open order, identified by a “B” (for Buy) or “S” (for Sell) tile, you can drag the tile to a new price to change your open order. If you’ve set a limit order price that is off the displayed price scale, the tile points in the direction of your chosen price. That gives you a quick visual cue that you’re trying to trade well away from the market.
Stock and ETF screeners have also been spruced up. Screener Plus allows you to use its built-in screens, or customize and save your own. You can combine technical indicators as well as fundamental data, selecting from over 140 variables. The ETF screener is a separate program from Screener Plus, and is based on the tool available to all Schwab customers. It’s now integrated into StreetSmart Edge in a built-in browser window; previously, you had to log into the Schwab Website to use the ETF screener.
The momentum tool offers interesting information, tracking the ratio of upticks to downticks for a stock’s quotes. If a score is calculated to be -2%, it’s saying there are 2% more downticks than upticks during the period. You can customize time periods; it defaults to one minute but you can go as high as 60 minutes. Keough advises clients to set up watchlists that separate highly volatile stocks from less volatile holdings and to monitor the momentum shifts with this tool.
Your StreetSmart Edge layouts are stored on your local computer, but you can also leave them on Schwab’s servers to make it easy to access the program from different computers. Right now it’s a Windows program that runs on Macs with the appropriate emulator, but Schwab is working on a native Macintosh application that it expects to release some time during 2012.
TD AMERITRADE (http://www.tdameritrade.com) launched a new release of its thinkorswim-developed Trade Architect platform in mid-December, as well. Trade Architect is a bridge program that helps an emerging active trader transit from the basic TD Ameritrade Website to all the bells and whistles of the thinkorswim platform.
Third-party research has been integrated into the Trade Architect platform, and the investing social network myTrade has also been folded in. MyTrade allows participants to share ideas, trades, charts and other ideas in a secure environment. Trade Architect’s profit-and-loss graphs can be quickly attached to a note, and if you see an idea that you like posted by another participant, clicking on a “copy” button pre-fills an order entry ticket with the particulars of that trade.
A stock screener was added to Trade Architect so that it now has 25 built-in factors, and the company plans to expand that to 80. The screens can’t be customized; Steve Quirk, senior vice president at TD Ameritrade’s Trader Group, says, “When clients need greater customization, they graduate to the full thinkorswim platform.”
One other change: the CNBC video feed no longer automatically starts when you launch the platform. Customers who were trying to access their account quietly didn’t want the video giving them away. So now you have to press a button to watch the feed.
THE THINKORSWIM PLATFORM IS also being transformed, starting with the home page that’s displayed upon login. It’s a much softer look than before, with two tickers that roll live news headlines and prices. You can find shortcut buttons that get you to any part of the application, such as Alerts, Charts and Trades, at the bottom of the screen.
Futures calendar spreads, a relatively rare feature, have been built into the new thinkorswim. Most futures trades take place one leg at a time, so the ability to create and trade a spread with multiple legs is of note. Pairs trading, which allows you to trade multiple futures contracts simultaneously, is also now built in. The firm has made futures transactions seamless again, following the hiccup that occurred when thinkorswim’s clearing operations were folded into TD Ameritrade’s clearing in August.
One terrific feature of the new platform is the real-time market-scanning tool, which monitors the markets for specific technical events like breakouts and moving-average crossovers on a tick-by-tick basis. The scans run very quickly, which Quirk credits to the horsepower provided by Ameritrade.
A LITTLE TOO PERSONAL CAPITAL: We heard from a reader who had started to use Personal Capital (http://www.personalcapital.com) after our story about the new service ("Intuit Chief Launches Finance Site,” Sept. 26, 2011). However, the reader had several foreign stocks that the Personal Capital identification engine couldn’t handle, so he decided to shut down the account. After some communication woes, the reader contacted The Electronic Investor over worries that his data remained on the firm’s servers.
Jay Shah, the company’s chief information officer, said the reader’s account was deleted within hours of his request, but somehow e-mails informing him got stuck in the ether. Shah explains that Personal Capital, as a registered investment advisor, must keep some data per SEC mandates, but any links to financial accounts are removed. The firm is required to maintain basic demographic information, such as a former customer’s name and address, as well as a summary of any advice they may have presented during their relationship with the client. “For account data, we apply the highest level of sensitivity and security. Nobody in the company has access to that information—it’s encrypted, locked away, and we’ve swallowed the key,” Shah says. He also assures us that Personal Capital’s improved identification engine is having fewer problems recognizing foreign stocks as well as options contracts.
IT’S THAT TIME OF YEAR AGAIN, as we gear up for our 17th annual review of online brokers. What feature or service could a brokerage offer that would entice you to sign up? What kind of research are you finding most useful in these volatile markets? Let us know at email@example.com .
Published in Barrons, January 2, 2012.