Saturday, August 11, 2012

TradeKing's New Realm

Following its merger with Zecco, the firm will use its social-media skills to try to woo customers from bigger rivals.

Online brokers TradeKing and Zecco agreed in mid-May to merge their operations to form a firm with approximately 500,000 accounts, though they said little about the details of the combination. We were able to pry some information out of the two firms’ chiefs in an interview last Tuesday.

TradeKing CEO Donato Montanaro and Zecco CEO Michael Raneri told us that the merged firms ("Two Facebook Followers Unite,” May 28) will operate under the umbrella of the TradeKing Group. They expect the two will be fully combined by the end of 2012 under the TradeKing brand. Until then, the Zecco name will still be used.

Montanaro will be CEO of the new TradeKing, while Raneri becomes vice chairman of the board and head of corporate development. A week into the regulatory review, Montanaro reports that it’s been smooth sailing, and they don’t foresee any big bumps along the way. The two firms share a low price point (commissions of $4.95 per transaction, plus 65 cents per contract for options), as well as a commitment to social networking. TradeKing offers rich features for options traders as well. Zecco originally charged zero commissions (hence its name), but over the years gradually moved up to the $4.95 price point.

Why are the two combining? Raneri sees an opportunity in the middle of the online-brokerage market—between the megafirms with millions of accounts and the small boutique firms with tens of thousands of customers. There, a bigger TradeKing can create a challenger to the large firms if it can improve services without raising prices.

“It’s hard to be nimble and innovative in a large organization,” says Raneri. “We want to appeal to an early-adopter audience that is savvy about social media, and also look at other financial-services business lines and see how we can reinvent ourselves.”

Montanaro expects numerous pieces of Zecco technology to survive the merger, including ZapTrade, a browser plug-in that generates an always-present trade ticket.

In the early post-merger stage, Montanaro and Raneri will focus on identifying new revenue streams. Says Raneri: “This could be anything from the technology experience to partnerships and acquisitions. There is a real opportunity in the competitive landscape, given the current state of the economy, to expand.” Though TradeKing’s expanded headquarters will be located in Fort Lauderdale, Fla., Raneri will stay in San Francisco and take advantage of the technology hub there.

TradeKing and Zecco recently made news by obtaining a restraining order to prevent their revamped clearing firm from drastically raising their capital requirements. The legal dust-up followed the demise of Penson, a big clearing operation that got into financial trouble, and the creation of a new entity, Apex Clearing, in its place ("Clearing Firm’s Exit Will Cost Brokers,” June 25). The two principals and Apex confirmed they had settled their disagreement and TradeKing would continue to clear through Apex.

Montanaro says he’s pleased the accord will have no effect on clients or their costs, though he doesn’t rule out finding a new clearing partner in the future.

ASIDE FROM ITS MERGER and settlement, TradeKing has found time to flex the muscles of its newly updated application programming interface, or API. SmartStops.net, which publishes an online newsletter and provides tools to help traders and investors understand the risk in their portfolios, has made its BrokerLink feature available to TradeKing clients. The improved API makes that possible. (BrokerLink was previously available only to TD Ameritrade customers.)

This means TradeKing customers can synchronize their account positions with SmartStops features without having to manually input data. SmartStops publishes risk alerts every market day for U.S.-based stocks and exchange-traded funds. If one of your positions triggers an alert, you’re notified to check your portfolio and consider taking protective actions, such as entering a stop-loss order. You can also configure SmartStops to enter an executable order on your behalf when a trigger is fired. TradeKing customers are eligible for a 15% discount on SmartStops’ services (smartstops.net). The protection features usually start at $9.95 a month, though a 14-day free trial is offered.

See, we told you we got some more details out of TradeKing and Zecco.

Posted by twcarey on 08/11 at 12:34 PM
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