To get started on Realized, all you do is create a user ID and enter your e-mail address, then click on a link to activate your account. That’s the easy part—now it gets a little bit tricky. You have a couple of methods of entering your trading history. The easiest is to go to your online brokerage account and download all your transactions in a comma-delimited (.CSV) format, in which each column of data is separated by a comma and each row starts a new line.

Almost all online brokers give you the option of creating a comma-delimited file, which you save on your computer. This is a step that can create a bit of pain if you’re not comfortable mucking about on your computer for a file, but it eliminates the need to enter your brokerage-account login information, which makes some people nervous. These files load quickly (even one that had several hundred transactions); at this point, you check over your transaction history to make sure it’s correct. You can also enter your transaction history manually, but that can introduce errors if you type the data incorrectly.

Once all the transactions from your various accounts are entered into Realized, the application creates tax lots, or records of transactions and their tax implications. By knowing the purchase date you can specify what shares to sell later on to maximize tax advantages. If you’ve fully or partially closed a particular tax lot, Realized will let you match the sale with the appropriate purchase.

One tricky bit of portfolio accounting that Realized tracks for you is corporate events, such as stock splits or reorganizations, which can change the cost basis of a particular tax lot. Realized will generate a Schedule D for you whenever you want, so you can keep an eye on your short-term and long-term capital gains as the year progresses. The program displays your largest unrealized tax losses, which you can sell to offset your capital gains, minimizing your tax payments.

The main advantage to using an application that looks at all of your brokerage activities across multiple accounts is that you may have activity in, say, your E*Trade account that generates tax consequences when you trade in the same stock in your thinkorswim account. The IRS doesn’t keep track of which brokerage handles your trading activity—your Schedule D looks at all of it together. It’s possible to sell a stock in one account that creates a wash sale when you buy it again in another account within 30 days. Realized will flag these events for you.

For now, Realized is in a late beta-test phase and there is no charge for its use. It’s worth checking out if you don’t have any other tax-management system in place.

FREESTOCKCHARTS.COM, as you might imagine, is a Website that offers (mostly) free stock charting. Published by Worden Brothers, the site also offers “almost-free” tools, including complete real-time data—the data you can see for free is from the BATS exchange platform, an alternative trading system that accounts for approximately 10% of all U.S.-based transactions. Adding NYSE or Nasdaq will run you $2.99 per exchange each month. There is a banner ad on the right side of the chart display; you can turn that off with another almost-free service for $4.99 per month. I simply move my browser window off to the right so that the ad is invisible.

This is a slick little charting application, which allows you to add a variety of technical indicators with a click. You can generate a chart and send it to others via Twitter or Facebook. One of the features that I appreciate most is the ability to look at the components of a particular index or exchange-traded fund using the site’s Watchlist function. I also like the ability to add columns to the tabular data display, such as whether a particular stock has broken through its 30-day moving average.

If you create an account, you can set up your own personal watchlists to track, and share them with your friends. Freestockcharts has its own social-networking capability, but the ability to connect with Twitter is also very useful.

THIS LAST ONE IS A BIT QUIRKY, and isn’t free, but will appeal to those interested in industrial and sector organization. Maptool X, published by Wall Street Images (wallstreetimages.com), uses old-world style maps to show the relationships between companies competing in a particular industry, and takes a stab at visually describing barriers to entry and forces of competition. This creative app can be downloaded from the iTunes App Store for $19.99.

Frankly, it took me about 20 minutes of puzzling over one particular display to figure out what it was describing, but once I got it, I had a great time checking out a variety of industries. I imagine those more experienced at playing video games will grasp the concepts more quickly. I checked it out on an iPhone; I’m sure this app would be magnificent on an iPad.

You can set up particular companies to follow, but the displays that most interested me were organized by industry. The larger companies are shown “protected” by a wall that keeps out potential entrants. If you hover over a company name, you will see some financial data (including market cap), while clicking on the company brings up recent trading data.

The displays will change depending on a firm’s market cap and its position within the industry. Maptool creates pictograms for nine industries, from basic materials to utilities with anywhere from 10-30 subindustries for each category.

These changes aren’t as dynamic as a real-time stock chart, but they will give you an idea of how a particular company fits within its industry. It’s thought-provoking at the very least. 

Published in Barron’s, August 23, 2010. 

E*TRADE IS FAR FROM THE FIRST brokerage to allow third-party programmers to tie into its trading system. MB Trading actually started out as a trading platform for a variety of analytical programs, such as ESignal (http://www.esignal.com) and Ninja Trader (http://www.ninjatrader.com). TradeStation’s (http://www.tradestation.com) developer network lists approximately 100 add-ons that tap into its own trading and analysis platform.

Interactive Brokers (http://www.interactivebrokers.com) also has a list of third-party firms that utilize its trading system, such as Covestor (http://www.covestor.com). TD Ameritrade (http://www.tdameritrade.com) has had its API available for the last three years and now lists over 20 developer partners.

These brokers offer a long list of third-party applications that you can tie to your account that include technical analysis and charting, mobile trading, idea generation, and a range of automated trading programs. Most involve paying an additional monthly or annual subscription fee.

Kevin Delo, E*Trade’s vice president of brokerage product management, said that the launch of its API was a response to customer demand. “We received calls from certain high-end customers who wanted to be able to develop their own applications,” Delo says. He also mentioned that many E*Trade customers are using applications from other vendors, and they would like to execute their trades in their accounts without having to leave those applications.

THE FIRST THIRD-PARTY APPLICATION E*Trade links to is CoolTrade (http://www.cool-trade.com), an automated-trading application which you customize with your own personal-trading criteria. Once you’ve got it set up, when a particular stock hits your targets, the CoolTrade application will execute a trade for you through your E*Trade account.

CoolTrade’s CEO, Ed Barsano, says, “I’m glad they chose us as their first API partner. It presents a tremendous opportunity for growth in the number of traders using our product.” CoolTrade also executes trades on Interactive Brokers, MB Trading, TD Ameritrade and OptionsHouse (http://www.optionshouse.com).

Barsano, a retired Microsoft developer, notes that E*Trade created a very efficient and secure process to enable third-party applications to link to it, noting, “From a programmer’s perspective, they’ve really written it well. I think it will be extremely easy for other companies to connect to it.”

Delo says that several other programs, including AbleTrader and ESignal, have applications in the works that will link into the E*Trade platform.

LIGHTSPEED FINANCIAL (http://www.lightspeed.com)—which offers direct market-access trading technology, risk-management tools and brokerage services for professional retail active traders and institutional investors—launched its Black Box Software Development Kit (SDK) for algorithmic traders last month. Lightspeed’s Black Box SDK allows algorithmic trading applications that target U.S. equities to automatically execute trades on the Lightspeed platform.

Andrew Actman, chief strategy officer for Lightspeed, says, “We are continually enhancing the brokerage services and technology infrastructure offered through Lightspeed Gateway [an automated trading system linked to U.S.-based equities exchanges], making it easier, faster, and more efficient for clients to implement their trading strategies.”

J. David Lipsett, MB Trading’s president, says, “We don’t view ourselves as a proprietary platform company, even though we have built our own software-based, Web-based and mobile GUIs,” or graphical user interfaces. Lipsett says that the purpose of his firm’s SDK is to allow access to those tools in all asset classes to any customer or third party developer who wants to tap into their trading system.

“The fact that we built our own platform on these very same tools demonstrates the confidence we have in the system that we have created,” Lipsett concludes.

IF YOU’RE A PROGRAMMER, or just want to build your own trading strategy, you can write your own custom interface that links to your trading account at an appropriate brokerage. Since it’s prohibitively expensive to bypass a broker and link directly to the exchanges, writing your own interface is the ultimate in customizing your trading experience.

There are some hurdles that a developer has to get over. Every API is different, usually written in a variety of programming languages. In addition, every broker’s compliance department has slightly different interpretations of the various rules and regulations.

So once you’ve got an application–whether it’s technical analysis, automated trading, or a mobile app–you have to make sure it works properly with the broker’s system. Then you have to make the lawyers happy by ensuring the customer’s privacy, and by seeing to it that the app places trades legally.

Is this something an individual investor should consider? If you’re handy with programming tools, and have time to tinker, it could be an interesting project. If it’s good enough, you could even make some additional money by attracting subscribers. 

Published in Barron’s, August 9, 2010. 

Lending shares affords an investor who doesn’t want to risk having a stock called away an opportunity to maintain ownership and also profit from the loan.

Says Fidelity (http://www.fidelity.com) customer Ron Kimmich of Chardon, Ohio: “I’ve been fortunate to have stocks that people want to borrow—and they have paid me handsomely for” the shares.

Kimmich has about 100 stocks in his portfolio, and is lending shares of eight companies. He says that Fidelity Capital Markets contacted him in March 2010 and informed him he had several stocks that were in demand by short sellers, who make bearish bets on securities. The shorts sell borrowed shares, in the expectation that they will be able to buy them back at lower prices later.

Kimmich says he was “uncomfortable” with the idea initially, but that the steady income stream has changed his view. He says he uses the income generated from lending to help defray trading costs for his shorter-term holdings.

Not every broker allows investors to lend out shares, and not every investor qualifies for the opportunity. The obstacles are partly technological, but also relate to whether customers hold stocks that others want to borrow. According to Peter Sosnowski, senior vice president of retail brokerage at Muriel Siebert (http://www.siebertnet.com), “it’s for more sophisticated clients, and for people looking to generate a little incremental revenue while they own a position—as long as there is a demand for those securities in the marketplace at that specific time.”

Although the criteria vary from broker to broker, those we consulted said a qualifying customer must have more than $500,000, and in some cases $1 million in assets in an account, and hold a large number of shares of the in-demand stock. Brokers report that equity-index and currency exchange-traded funds, and equities such as American International Group (ticker: AIG), Sears Holdings (SHLD) and Garmin (GRMN), are most in demand.

In most cases, candidates for lending are informed by their brokerage that they hold stock of value to short sellers, and are asked if they would like to participate in the brokerage’s program. The annual interest rate varies from stock to stock; the lowest rate is around 2% of the value of the shares loaned, but rates can range as high as 80%.

CUSTOMERS OF FIDELITY AND MURIEL SIEBERT can participate in the stock-lending program administered by Fidelity Capital Markets. Both firms clear through National Financial, a subsidiary of Fidelity. Making a stock available to lend out involves some administrative work, including the signing of a lending agreement with Fidelity Capital Markets.

Customers of Interactive Brokers (http://www.interactivebrokers.com) can lend their shares via a specialized trading tool integrated into the company’s trading platform, Traders WorkStation (TWS). The tool is available to IB customers who qualify to buy securities on margin, and it provides access to the stock-loan market. IB’s clients list their securities on the AQS platform, an all-electronic, direct-access securities-lending market for U.S.-based stocks operated by Automated Equity Finance Markets.

Another IB tool, the Yield Optimizer, lets customers see which of their holdings could be generating interest income for them if they lend these holdings out. The Yield Optimizer also helps short sellers determine whether it is cheaper to borrow stock through AQS or directly from IB.

Kimmich, the Fidelity customer, says that the stocks he is lending are displayed in his portfolio report, and are flagged with a “loan” marker. Fidelity deposits the interest income into his account around the fourth of each month in a single transaction; he can obtain a detailed report online of the interest rate he’s getting for each stock.

Fidelity enhanced its program in February, making more information available online about securities on loan. It is possible to sell a stock that you are lending out by using the usual online tools. Previously, any transactions affecting loaned stock had to be done with broker assistance. When you click on the “Loan” link in the portfolio display, you’ll get an online summary of the securities you are lending, including the current value of the loans and the interest rate accrued.

Involving retail clients in lending “has been in and out of favor on a global basis for the past 20 years,” says Tim Smith, a senior vice president of SunGard Securities Finance. “The main stumbling block has been the lack of transparency in terms of both risk and reward, and the [assurance of] protection to someone who would not be an expert in this activity.”

Loaned securities aren’t protected by SIPC (the Securities Investor Protection Corp.) if your broker or clearinghouse fails. Therefore, the clearing agent must post collateral of cash and securities equal to or greater than the value of the securities on loan, marked to market at the close of each trading day. In theory, then, the loan is 100% covered—even better than they would be by SIPC. Should the borrower go bankrupt, the shares are returned to the lender.

THERE ARE A FEW OTHER wrinkles associated with lending shares. Dividends earned on stocks lent to others are taxed as non-qualified income, meaning you’ll pay ordinary rates, not the 15% rate on qualified dividends. You’ll also lose voting rights on lent shares, although you can recall the shares if there is an important issue you’d like to vote on.

A bigger issue is the possibility that you might be betting against your own net worth by loaning stock you hold to those who believe the price will go down. According to Gregg Murphy, Fidelity’s Senior VP of retail brokerage, “those who think that way just don’t participate. Typically, we see very educated investors take part in the lending program.”

Brokerages such as E*Trade and MB Trading don’t have programs to let customers lend securities. But the success of the early adopters could mean more initiatives soon will be under way. 

Published in Barron’s, July 19, 2010. 

A recent upgrade added Financial Manager, which is an account-consolidation tool powered by Yodlee. This allows you to view non-EverBank assets and liabilities, providing a more complete balance sheet. Using Yodlee’s secure log-in, customers enter their user IDs and passwords from other financial sites, such as those of brokerages, credit-card firms, and lenders, and the Financial Manager draws a more complete picture.

Says Jane Dulle, a senior vice president at EverBank: “One of our key value propositions is that customers can use our checking and money-market accounts to park their uninvested cash, and get a view of what’s going on with all their accounts at once.”

WORLD MARKETS IS EVERBANK’S specialty-business line, allowing clients to hold foreign currencies at relatively low minimums, as well as foreign-denominated money-market accounts. There are approximately 20 currencies available for money-market accounts, along with certificates of deposit (CDs). The bank also creates and sells index CDs that are set up along themes, such as petroleum countries or emerging markets.

EverBank also permits customers to hold gold or silver through its World Markets offering. You can buy “allocated” or “unallocated” metals. Allocated metals are owned directly by the investor, in the form of coins or bars held in custody by the bank. Unallocated metals aren’t owned directly by the purchaser, but have lower minimums and no storage fees.

Dulle says most of EverBank’s brokerage customers started out with a bank account, then opened a brokerage account for the convenience and the international products. Opening an additional account once your first one is in place requires only the filling in of a few fields. It takes just a few seconds.

One caveat: The bank’s brokerage fees are higher than average, especially after all the discounting throughout the industry earlier this year.

Domestic stock transactions are $10 per trade for up to 2,000 shares. Larger trades run an additional one cent per share. Options fees are also high–a base rate of $14.95 for online transactions, plus $1 to $1.50 per contract. Mutual funds can be purchased only with the help of a live broker, for $25 per trade.

Would I move all of my accounts here? I doubt it. This isn’t a site that will be useful for an active trader, especially one interested in options. I find the World Markets offerings intriguing, however, as a place to park excess cash in non-dollar investments.

The bank’s account-consolidation feature can be helpful, as well. I’ve been testing Mint (http://www.mint.com) for a couple of months and have some quibbles with the way it presents its reports. EverBank’s Financial Manager is more easily customized. 

Published in Barron’s, July 12, 2010

During the site’s introduction in February, Sally Krawcheck BofA’s head of wealth management, said that it would be aimed at “those clients who today have ‘play money’ at one of the online brokers.” The “play-money” concept was certainly true in the late 1990s, but today, online brokers such as Fidelity and Charles Schwab, can snatch entire accounts from full-service brokers. That trend accelerated in late 2008, amid the credit crisis.

Merrill Edge appears to be an attempt to hang on to those full-service clients, who may trade online elsewhere. However, the service will only be extended to Merrill customers on request. BofA brokerage clients have been automatically converted to Merrill Edge.

The main benefit for BofA (ticker: BAC) clients is online access to some Merrill research. Otherwise, the site doesn’t offer much that’s new beyond the rebranding and a fresh coat of paint. Merrill Edge boasts on the site that it already has 1.16 million customers with $48 billion in assets, which averages out to $41,400 per customer. That’s less than the December 2009 average that E*Trade and Schwab reported for our annual online broker review; it’s slightly more than TDAmeritrade.

Merrill Edge extends BofA’s “free” trades (30 per month) for customers with more than $25,000 in assets. Those who don’t qualify, or who trade more than 30 times per month, will be subject to fees that vary with account size. The price breaks start with accounts of $250,000 and up. Commissions for online trading range from $4.95 to $8.95 per stock trade. Broker-assisted trades are $50 to $75 for stocks and exchange-traded funds. Margin rates are currently 7.5% for a $50,000 debit balance.

COST-BASIS REPORTING BEGINS soon. Starting with stock purchased in 2011, your broker will be required to report the cost basis—as well as the proceeds—of your closed positions to the Internal Revenue Service. The main purpose is to cut down on underpayment of capital-gains taxes. While the IRS will, presumably, collect more from taxpayers who are forced to be honest, financial-services firms are investing large amounts of money to try to provide accurate reports.

Cameron Routh, senior vice president of Scivantage, the publisher of performance-reporting system Maxit, says the main problem for retail investors will be collating transactions made at several different brokers. Routh says that the average number of online-brokerage accounts per trader is 2½, which means that most investors will be dealing with reports from several brokers.

One related trouble spot is wash sales. A wash sale occurs when shares of a particular security are sold at a loss and a substantially identical security is purchased within 30 days. It doesn’t matter whether the sale or purchase happens first, so long as there’s a 61-day window.

Let’s say you sell a stock from your E*Trade account on June 1, then buy a “substantially identical” one in your TD Ameritrade account on June 10. The IRS doesn’t care where the transactions took place. Under the law, you must report the wash sale accurately when you prepare your Schedule D. We’ll be checking tax programs to make sure they can handle transactions done in different venues.

NEW TOOLS: ZECCO (http://www.zecco.com) recently rolled out its Zap Trade tool, which lets you have an open Zecco order ticket while you peruse other financial sites. Zap Trade is a browser plug-in. It currently works only with Firefox, although Zecco plans to introduce versions for other popular browsers.

Zap Trade scans and prefills an order ticket, while you browse compatible financial and investing Websites. It works with Bloomberg, CNN Money, Google Finance, Yahoo! Finance, MSN Money, Reuters, MarketWatch, the Motley Fool, and The Street. It’s also active in the public-research areas of E*Trade, Scottrade, and TD Ameritrade.

You can trade stocks and ETFs with Zap Trade. Trades of mutual funds, options, and other products haven’t yet been enabled. Zecco’s usual commissions apply, although use of the plug-in is free. 

Published in Barron’s, June 28, 2010. 

As a result, the two new fee plans for futures trading at IB include bundled, which cover all exchange and regulatory fees, and unbundled, a kind of à la carte menu in which fees are added to the basic transaction cost. Exchange and regulatory fees, as you would expect, depend on the trader’s membership status at the exchange where the trade occurs and the country in which it takes place. The array of fees can be bewildering, though a savvy trader who understands the details of the products can save money by choosing the unbundled plan.

The bundled commissions, as of mid-April, are 85 cents per contract, a significant decrease from the previous $1.24 to $3.75 per contract that IB reported for the Barron’s online-broker review in March. For those who would rather figure out the additional fees on their own, the volume-tiered unbundled plan now costs 25 cents to 85 cents per contract plus exchange, regulatory and carrying fees. Previously, the top commission was $1.25 per contract. Four price tiers based on monthly trading volume are available. Full details can be found at http://www.interactivebrokers.com/en/p.php?f=commission&p=f&p2=futures3#e; click on the “US Exchanges” tab.

Wilkinson says the tiered pricing structure for foreign futures and futures options has been simplified; it still looks fairly complex to me. Though I’m generally against tiered pricing structures, I understand that these prices are dictated by the exchanges rather than by IB’s policy. IB clients can trade equity, foreign exchange, fixed income, energy, metals and other commodities futures and futures options worldwide from a single account.

IB isn’t alone in attacking prices. Schwab, E*Trade and Fidelity have already reduced their trading costs. And now ING Direct’s ShareBuilder (http://www.sharebuilder.com) is cutting fees for real-time transactions for its Advantage customers, who pay a monthly subscription, to $7.95 from $9.95. ShareBuilder is designed to encourage regular investments; Advantage clients subscribe to the site’s services for $12 per month, which entitles them to make as many as 12 stock purchases in specific dollar amounts every month. For instance, you could set up a program in which you buy $100 of Apple (ticker: AAPL) stock every week, plus $250 of a favorite exchange-traded fund monthly. When you want to sell stock, you place a real-time trade.

ShareBuilder also has a pay-as-you-go pricing plan, Basic. Under this program, you pay $4 for each automatic investment and $9.95 for each real-time trade. The site offers a one-month free trial of the Advantage program to new customers. The firm eliminated a third pricing tier, and for that, hooray.

New tools of the trade: TD Ameritrade (http://www.tdameritrade.com) clients who use the platform of its thinkorswim unit can now access an innovative trading simulator called thinkOnDemand. ThinkOnDemand lets investors replay a trade with tick-by-tick data, allowing them to review the conditions at the time of the transaction in slow motion.

The thinkorswim system from the TD Ameritrade trading platform enables thinkOnDemand to paper-trade stocks, futures, foreign exchange and options. Traders can select any date from the previous four months and replay, fast-forward and pause the archived market data. You can enter simulated trades and see the hypothetical results. It’s an extraordinary learning tool integrated with the live trading platform; we raved about its inclusion in the thinkorswim platform back in March.

TD Ameritrade clients who use the thinkorswim platform also have access to several other new tools, including Gadget 360, which displays complex options data in graphical form, the Market Cast squawk box with live discussion of market conditions, and additional charting, analytics, alerts and news.

Published in Barron’s, June 14, 2010. 

“We think of it as Morningstar meets eHarmony,” says Chief Operating Officer Kevin Cimring.

Most investors using screeners must select attributes that require a certain level of sophistication, such as specific financial ratios and growth rates. The Jemstep approach is very different. Users may come to the site not really knowing what is best for them. So the Jemstep engine walks them through a process that essentially says, “Tell us a little about yourself and we’ll show you what’s best.”

When you sign up for Jemstep, you are asked a few questions about your investing style and when you expect to need the money. The system’s algorithm takes over from there. You can answer a wide range of questions, which will give you more personalized results, or just a few, which offers just a start. Setting up your full profile includes questions about your tax rate and types of holdings you prefer (domestic or international, stock or bond fund, etc.).

In meantime, the system analyzes more than 100 attributes of each possible investment—such as volatility, returns and costs—and then weights each variable based on the investor’s preferences. The 10 most appropriate funds, plus any that the user may have specified, are displayed with a “Jemscore,” which shows the fit for that particular user, expressed as a percentage (up to 100%).

At present, the Jemstep engine compares 18,000 funds.

Jemstep is just now entering a public beta-test phase, so you can check it out and help the developers kick the tires. It’s free; in the long run, Jemstep plans to generate revenue by providing leads to online brokers and other financial Websites. The idea is to keep the site free for investors.

Cimring says the next step will be portfolio assessment and asset allocation. A user will be able to establish an asset-allocation target for the portfolio. If it’s over- or underweight in certain areas, Jemstep will recommend specific funds to meet that target. “Down the line, it will be a very powerful asset-allocation tool,” Cimring says.

Simon Roy, executive vice president of corporate development, says the company is working on additional tools that will help investors rebalance their holdings. In the future, Jemstep will include account-aggregation services, such as those you would find at Mint.com. You would then be able to use the Jemstep ranking engine to decide which stocks/funds to add to, and which to sell.

Roy says, “We’re trying to close the loop to offer some guidance. We’ll hold their hand through that process. An allocation only helps you if you act on it and stick with it.” Jemstep is a registered investment adviser.

VIVA ITALIA: INTERACTIVE BROKERS (http://www.interactivebrokers.com) now allows its customers to trade stocks on the Borsa Italiana, allowing access to 376 listed stocks and exchange-traded funds. Investors can denominate their accounts in one of 11 base currencies, including the euro. Commissions for these trades are 0.1% of trade value, with a minimum charge of $4 and a maximum of $29.

IB’s clients now are able to trade stocks on 10 European exchanges, having already had access to the Austrian, Belgian, Dutch, English, French, German, Spanish, Swedish and Swiss bourses. For more information about these listings and their associated commissions, see http://www.interactivebrokers.com/italy.

FINANCIAL APPS ON THE IPAD: They’re already here. Nasdaq OMX has ported its Portfolio Manager application to the iPad, and E*Trade has launched Mobile Pro for the popular device. They aren’t the only ones. Are Barron’s readers jumping on the iPad bandwagon? Let us know at electronicinvestor@yahoo.com .

Published in Barron’s, May 24, 2010. 

One new feature is a custom profile builder, which walks you through the layout of your platform. There are numerous tools for active traders, such as streaming Greeks (options features named for Greek letters), as well as options chains and watch lists. You can also enter a contingent order on Xtend, buying, say, 200 shares of the PowerShares QQQ (QQQQ) exchange-traded fund, which tracks the Nasdaq 100 when Microsoft (MSFT), for instance, hits a certain price.

Xtend also enables a tool more common in the futures world—ladder trading—for stocks, ETFs and options. Using a ladder, or price list, gives you a different picture of how the price is moving. You can place a trade by clicking on the Buy or Sell box next to the price you want to use.

Quotes for the items in your portfolio are displayed in a ribbon across the bottom of the screen. All the tools available to you are indicated in icons below the quote ribbon. Those in gray are already on your layout screen, while those in color can be added with one click.

Several thousand optionsXpress customers have been critiquing Xtend since last summer, and Fisher says he believes the platform now is “rock solid,” after incorporating numerous suggestions.

One feature that will please active traders who use multiple computers during the trading day is that settings will follow you from one computer to another because they are stored on the server side. “No matter what platform you launch Xtend from, it will look like it did when you closed it down [after] the previous use,” says David Fisher, CEO of optionsXpress.

Depending on how many tools you load at once on the screen, Xtend can look pretty busy, especially with the streaming quotes and constant updates. Infrequent investors might be overwhelmed.

STREAMING ON ZECCO: Zecco (http://www.zecco.com) has also launched two Web-based streaming applications. Zecco Streamer Lite gives traders free real-time, streaming quotes from the BATS exchange (an electronic communications network also known as the Better Alternative System), including last-sale information for more than 1,000 of the most commonly traded equities. It also includes a trading module, a real-time Twitter investment feed, and access to the ZeccoShare sentiment indicators.

Zecco Streamer includes all the features in the “Lite” version plus other tools, such as Level I streaming quotes, streaming charts with technical-analysis overlay, streaming options quotes and news feeds. The Streamer is $19.99 a month after a 30-day free trial. The $19.99 seems like a lot, given the tools offered, although you get 10 “free” stock/ETF trades a month at Zecco if you have more than $25,000 in your account.

VANGUARD CUTS FEES: Vanguard (http://www.vanguard.com) announced May 4 that its customers can trade the firm’s lineup of 46 exchange-traded funds commission-free. Vanguard’s ETFs, designed to track an array of domestic and international stock benchmarks, as well as several segments of the domestic bond market, have very low expense ratios.

With this fee change, the firm is encouraging clients to tailor a portfolio of Vanguard ETFs to meet their long-term goals, contribute to it monthly, and rebalance it periodically, commission-free. In a statement, Vanguard CEO Bill McNabb said the commission-free offer “enables investors to construct a balanced, long-term portfolio of low-cost Vanguard ETFs and add to the portfolio regularly.”

I find it unfortunate that Vanguard is creating more tiered pricing schemes, especially since most online brokers are phasing them out. Customers with more than $50,000 in assets at Vanguard can place other stock/ETF transactions for a $7 commission; if you have more than $500,000, the commissions drop to $2. There are four pricing tiers; details are at https://personal.vanguard.com/us/whatweoffer/personalservices/flagship.

We sent out a request for information for this year’s review ("Newest Trading Play: Screen Savings,” March 15) in mid-January, but got no response from these banks, even after several attempts. The review process requires a lot of cooperation from the brokers themselves, including access to a live customer account, making it impossible to review a firm that remains silent. We hope they come back in the future, but it may be a sign of how different the markets for frequent or sophisticated traders/investors and more casual users has become.

Why didn’t you include Folio Investing (http://www.folioinvesting.com) and ShareBuilder (http://www.sharebuilder.com)?

We decided it was better to treat these two firms in a separate story, since their services don’t fit well into our scoring rubric. These sites cater to buy-and-hold investors, and our review favors brokers who provide real-time data and trading capabilities.

Why didn’t you include the clearing firms that these online brokers use, since their failure can be devastating to shareholders?

We actually did collect the data on the clearing firm for each of our online brokers, but we had to cut it out because they’re simply wasn’t room for it.

Is Penson, the clearing outfit for many online brokers, up to the job in light of its thin profit margins, declining revenues and sagging stock price?

Penson services (http://www.penson.com) eight of our surveyed brokers, most of whom cater to very active traders. The firm, which was recently fined by the Financial Industry Regulatory Authority for inadequate anti-money-laundering procedures, services a segment of the online business known for running on razor-thin margins.

According to its clients, Penson offers aggressive pricing and runs highly efficient operations. At least one broker we spoke with plans to move its clearing operations to Penson in the next few months.

“We are very pleased with the services provided from Penson, and feel they are the best solution for our business,” says David Lipsett, president of MB Trading (http://www.mbtrading.com), a client. He notes that Penson has grown in its correspondent network, and is also expanding globally as the firm establishes connections in other countries.

In an e-mail, Penson President and Co-founder Dan Son assured Barron’s the firm’s finances “are sound, with capital well in excess of regulatory requirements in all subsidiaries.” As a public entity, Penson also has access to the capital markets and is highly liquid, he says. Declines in revenues and earnings are attributable to slower industry volumes and lower short-term rates, which affect the spread Penson makes on balances, notes Son. However, the firm’s ability to grow its business and services is a sign it’s “solidly financed,” says Son.

ALTHOUGH WE WEREN’T PROMPTED by a reader query, we’d like to clear up a misunderstanding about TradeStation (http://www.tradestation.com). We said you could test the effects of slippage (the difference between the expected price of a trade, and the price at which it’s actually executed) with its system. Technically, that’s correct, but the function we cited is actually an indicator written to show off the platform’s power. Also, RadarScreen has been around for several years; it was enhanced in 2009.

IT CAME TO OUR ATTENTION DURING our online-broker review that another financial publication had ‘borrowed’ large portions of our survey—a questionnaire in Excel format that is sent to all of the reviewed firms—for an upcoming story of its own. The other publication decided, after the issue was pointed out to them, to delay their story. Imitation may be the sincerest form of flattery, but we appreciate their decision to produce their own set of queries for their own readership.

IN BARRON’S 15TH ANNUAL ranking of online brokers, we found no sign that the pace of innovation was slowing down. New products are proliferating. Investors can now work out complicated options straddles, place orders virtually instantaneously and put their money to work in Singapore or Germany while hedging their bets in dollars or euros or exchange-traded funds.
[image] Barron’s Graphics

To make sense of all these new opportunities, online investors increasingly rely on each other. When TradeKing launched its social-networking community in 2005, we were, we have to admit, skeptical. But now, with traders and investors talking things over on a variety of online stages, from Twitter to closed groups, it’s apparent that the communities are an established—and accepted—part of the investing diorama.

“The social-media component for the active trader is something we’re seeing more and more,” says James McGovern, a vice president at financial industry research firm Corporate Insight. “Schwab has its community, as does Zecco, TradeKing, Trade-Station and thinkorswim—and that shows no sign of going away. I imagine other firms that are thinking of doing it will go there.”

Many investors who used to look to financial advisors for hand-holding now seek knowledge elsewhere. TD Ameritrade and Scottrade last year beefed up educational resources, always a strength for thinkorswim. Newcomer tradeMonster hosted more than 200 Webinars and 30 live events. McGovern says, “In tough market times, that’s when people start looking for help, hitting the books and going back to basics.”

Of course, they’re able to tap into these resources via a dizzying array of new technology that now extends to mobile trading. Several brokers launched sophisticated iPhone and BlackBerry applications that enable streaming real-time quotes, and even complex options-order entry.

A number of online brokers improved their rankings over Barron’s 2009 survey by updating their Websites and making key features more accessible. In preparing this ranking, we investigated the offerings, operations and pricing of 22 online brokers this year, looking for the characteristics that set each apart.

We evaluated these rivals across eight categories. Among them: the types of tradable investments; the quality and ease-of-use of screeners that help you choose stocks, options or funds; and the site’s startup process, overall functionality and potential for customization. We recently mentioned to brokers that a reader had asked for an automated-trading journal, and to our surprise, several added this feature in time for our review.

We also looked at how trades can be placed with each broker, such as whether an order can be submitted from a graph or a mobile device. The quality of education offerings and customer service were examined. In reviewing costs, we considered not only stock and option commissions, but the interest rate charged for margin debt and fees for other types of transactions and activities.

Although Barron’s names a No. 1 broker, that doesn’t mean it’s the right pick for your style of investing, so we also name leaders in four other categories—long-term investing, options trading, international investing and high-frequency trading. We also display the lowest- and highest-cost brokers for those who trade a few times a month or several times a day.

Without further ado, then, here are the top online brokers of 2010. A table (How Barron’s Ranks 22 Leading Online Brokers) shows the numerical scores of all 22 outfits. See reviews of all 22, plus additional data, at Barrons.com.

Thinkorswim (http://www.thinkorswim.com) once again dazzled, earning 4½ stars. Last year, we worried about the pace of innovation following the firm’s takeover by TD Ameritrade, but thinkorswim’s president, Tom Sosnoff, put those fears to rest. Sosnoff says that thinkorswim still operates as a separate broker-dealer from TD Ameritrade, mainly because the two brokers have different clearing operations.

Though the platform has a wide variety of tools, there are no added fees beyond commissions, which fall in the middle of the pack. Thinkorswim added free access to Gainskeeper, a cost-basis and tax-accounting tool, last November; it handles not only stock and options transactions but futures and foreign exchange. You’ll find live broadcasts from the S&P 500 pit as well as Shadow Trader, and a live feed from CNBC.

One interesting new feature, rolled out in mid-January, is thinkOnDemand, which uses online retailing giant Amazon.com’s cloud technology. It’s analogous to Nasdaq’s Market Replay feature but takes it several steps further. ThinkOnDemand saves every price tick in every options contract available as well as every listed equity and allows you to stream historical data as though it’s happening in real time. This permits customers to practice their trading strategies against real data. Loading and buffering the data can take 1-2 minutes; Sosnoff says most of the traders using this feature launch it after the market closes to practice trading or to check on how an order was filled. Charting functionality was added at the end of February.

Another new thinkorswim feature is Prodigio, which offers drag-and-drop trading-model tools with back-testing capabilities. Prodigio can run either inside the thinkorswim platform, or it can be launched independently. A menu on the left side of the screen allows access to tools such as trade actions, type of data, logical operators, technical analysis studies, candlestick patterns, and mathematical equations. Using the Java-based system, you connect the selected tools to create your trading model. Once you’ve developed a model that you want to use, you can connect it to your thinkorswim account and generate orders. It’s an amazing piece of technology, but not for an amateur or the timid.

Thinkorswim offers great customer service and a wide array of educational offerings. You can access the tools via its downloadable-software platform, and most are also available on the Web. Many of these powers have been pushed through to the thinkorswim platform for TD Ameritrade customers, which we’ll discuss later.

MB Trading (http://www.mbtrading.com), just a whisker behind thinkorswim in total points, also earned 4½ stars. It got there by spiffing up the platform that we so appreciated last year, renaming it MBT Desktop and adding an excellent Web platform, MBT Web 2.0, to the mix. It also released an upgraded software application, MBT Desktop Pro, which features an easily customizable charting application. The charting functionality in the Pro platform allows you to write your own custom indicators, and overlay those on your chart.

Another feature, MBT World, is accessible from all of the firm’s trading platforms and includes a social-networking feature, plus Webinars about MBT products and partner products, not to mention a Wiki with frequently asked questions about MB Trading. Within the community feature is a link for submitting ideas that customers can vote on.

One intriguing offering in the MBT suite is its alerts. You can write custom-alert scripts with hundreds of possibilities, including technical and fundamental indicators. When an alert goes off, you can reset the trigger quickly and get back to your trading. You can also set up alerts so that the details of what triggers them are hidden—so you can trade or even sell them to other MBT customers.

MBT’s basket-trading functionality lets you create a group of orders and execute them simultaneously. The group of trades can be closed as a basket, or closed individually. The Advanced Options Strategist has 64 strategies built in, and you can create your own. Each strategy is illustrated with a graph and an explanation of the basics, as well as its risk/reward characteristics. After you’ve selected an underlying stock and a strategy, the tool figures out the appropriate way to implement the plan. You can set different default-volume quantities for stocks, futures, and options orders. Your order-entry screen will display these defaults, depending on what you’re trading.

When we talked up the idea of a trading journal to log activity, MB Trading came back with its new Lightwave platform. Lightwave’s opening screen shows trading pressure for every asset class you can trade at MB Trading, and includes a variety of stock and options scanners. You can use any of the MB Trading platforms with a single login, and switch among them as you please. We would love to see the Lightwave features integrated into the Web and Desktop applications.

“Our main objective is to continue to be a low-cost provider in all major asset classes that offers solid customer support and software solutions for everyone from beginners to advanced traders,” president David Lipsett says. MB Trading seems to be meeting its objective.

Below are the nine online brokers who earned a very respectable four stars, together with both their pluses and minuses.

Interactive Brokers (http://www.interactivebrokers.com)

Pros: It still leads the pack in access to global markets, with access to bourses in 17 countries on five continents, and cost-consciousness. Consulting outfit Transaction Auditing Group showed that IB customers enjoyed quite a bit of price improvement—a 31-cent advantage per 100 shares and 21-cent advantage per options contract—compared with the industry average over the second half of 2009. Its trading platform, Traders WorkStation, was enhanced with added portfolio analysis and risk-management tools, plus expanded access to real-time streaming news. Short sellers can tap a wide array of items, and customers can now trade in multiple currencies as well. Education offerings are wide-ranging and well-written. The mobile applications are very usable and offer streaming data.

Cons: Although improved, TWS is still not an intuitive platform to use. The learning curve is steep. This is a broker more geared toward professional traders, so buy-and-hold investors should steer clear.

TradeStation (http://www.tradestation.com)

Pros: The go-to broker for those who develop their own trading systems, though competition in this field is heating up. On top of all the modeling functionality built into TradeStation’s platform, the firm added ways to test slippage (the difference between the expected price of a trade, and the price at which it actually got executed) to their models. Slippage is a major factor for those trading foreign exchange, as the spread changes quickly in volatile markets. The ability to create your own parameters when testing an idea is implemented well on this platform. A new feature is Radar Screen, which is a real-time opportunity scanning tool. TradeStation Support center offers a lot of educational information, and the recently launched Strategy Network allows strategists to sell subscriptions to their calculations. As TradeStation Vice President Janette Perez says, “You cannot outgrow our platform.” For new accounts opened by March 31, TradeStation will waive monthly platform fees for four months.

Cons: It’s a lot of technology, and not for the casual trader. A platform fee of $99.95 per month is charged for those who trade below certain levels. Bonds can only be traded with a live broker.

OptionsXpress (http://www.optionsxpress.com)

Pros: OptionsXpress underwent a site redesign that cleaned up navigation considerably. The firm allows its customers to trade a wide variety of financial products in a single account. The suite of tools has been consolidated into “hubs,” so that they’re much easier to find and use. In addition, optionsXpress rolled out a variety of streaming tools and data, including streaming options chains and customizable charts. You can enter and modify an order from a chart, which is a function many technical traders want. The mobile application, OX Mobile, is well designed, with streaming real-time data, charts, and watch lists, and stock, options, and futures trading. CEO David Fisher says, “We found that customers are doing significantly more trading through these phone-based apps than we thought possible.” Portfolio margining calculations help traders who hedge their positions keep their margin costs down. You can see how much price improvement you got on a particular order when you look at your order status screen, which is a nice touch.

Cons: One of the few brokers left with tiered pricing; $14.95 per trade puts them near the top of the stock commissions list.

Fidelity (http://www.fidelity.com)

Pros: Fidelity continues to offer a stable platform with a wide variety of products that can be traded online. It made a number of changes to its pricing structure last month, eliminating the tiered commission structure, and offering 25 BlackRock exchange-traded funds at no fee. A nicely laid-out and informative Stock Research Center was introduced last fall, along with an international trading center that lets customers trade in 12 overseas markets and eight currencies. The Fixed Income Investments center is an excellent place to learn about, and choose, bonds for your portfolio. Active Trader Pro (ATP), Fidelity’s downloadable software platform, received charting enhancements that include customization options. ATP also updated its options features, and now includes an Option Pairing Summary, with the ability to view options based on underlying security, strategy or expiration. Overall this is a very deep offering with numerous portfolio analysis tools.

Cons: The tools are divided across several platforms. To make the most of Fidelity’s offerings, you’ll have to use both Active Trader Pro and the Website.

TradeKing (http://www.tradeking.com)

Pros: The firm is still the king in integrated community resources on its trading platform. Expanded education resources include a variety of Webinars, an updated edition of the Options Playbook, 13 “all-star” trading bloggers, and an area called “The Rookies Corner” in the online-learning center. TradeKing also went into the fixed-income market with vigor, launching a bond-screening tool and an interactive table of fixed-income investments that shows users a snapshot of the entire marketplace, and what yields are available in various time frames. Other enhanced tools include deeper quote pages, more options data, and much-enhanced stock screeners. The new Trading Dashboard brings the Trader Network community resources right into the TradeKing platform, and is nicely customizable. You can set up a trading journal at TradeKing through the Trader Network as well.

Cons: There is some portfolio analysis functionality that is not available unless you use the Trader Network. You can’t select a tax lot online when closing a position.

TradeMonster (http://www.trademonster.com)

Pro: This online broker has created a very useful and customizable platform, especially for options traders. The recently launched TradeCycle illustrates the steps a disciplined trader should follow when choosing a trade. The folks at tradeMonster consider this cycle a key to proactive investing. The steps all use key functions of the tradeMonster platform, such as research tools, strategy-selection tools, ways to test strategies and exit planning. The charting features are enhanced frequently, and include streaming implied volatility for every expiration and strike price, displayed against a 30-day average. Trade-Monster maintains its own volatility database, which is a key component in choosing an appropriate options strategy. TradeMonster also added a trading journal in time for this review, which allows you to create an entry that captures the values for several indices, plus the underlying price and implied volatility, at the point an order is filled. You can attach notes to it and keep track of what you were thinking when you got into that trade. TradeMonster added mobile access in the last year as well. The firm has low margin rates.

Cons: Cannot select a tax lot when closing a position.

OptionsHouse (http://www.optionshouse.com)

Pros: The site is packed with tools for options traders, and it has added some for stock traders, too. The core of the Options- House platform is its risk viewer. President George Ruhana says, “We really want people to understand the risk associated with their positions.” He notes that a customer may have a position that is suitable on the basis of his margin but inappropriate for the size of his account. The potential effects of a change in the market on your positions, and your overall portfolio, are nicely laid out and understandable. Ruhana acknowledges that a lot of his customers have accounts elsewhere, and bring assets to OptionsHouse for its options-related tools and low stock commissions. Clients place approximately 100 trades per year. The firm launched a mobile-Web application in October 2009 that handles trades, order management, and portfolio management. An iPhone-specific app is planned for later this year.

Cons: Very options-centric, as the name would suggest. A change in options commissions from flat-rate to per-contract went into effect in December.

TD Ameritrade (http://www.tdameritrade.com)

Pros: This is one of the places you can still go for “one-stop shopping” and is benefiting from its takeover of thinkorswim. The toolset available to TD Ameritrade customers was much enhanced by the launch of thinkorswim from TD Ameritrade last year. Anyone interested in higher-level options data, research, and charting should be moving over to the thinkorswim platform. On the Website, one of the key strengths of having a TD Ameritrade account is the wide range of third-party research that’s built into the platform and easily available, from outfits like Credit Suisse, S&P, Market Edge, Ford Equity, First Call, Vickers Insider Trading and Morningstar. The order entry “snap ticket” was updated this year to include streaming quotes and mini-charts. The Website built in a bit of community function by displaying the symbols and news articles that have been most viewed by the client base that day. We expect to see the technology continue to be enhanced with thinkorswim tools. Single-stock futures, futures, and futures options will be added in the next few months.

Cons: Not engaging in the “price wars,” which is a mixed blessing. Stock transactions remain at $9.99, and options fees are near the top of the list. Many tools segregated on separate platforms.

E*Trade (http://www.etrade.com)

Pros: E*Trade is another one-stop shopping destination, and features terrific mobile-trading applications. The broker has enhanced a number of services, including fixed income, research, retirement planning, active trader and advice-based tools. It’s also implemented some navigation improvements, allowing for greater site customization and focused on better customer service. Mobile Pro for the iPhone is one of the best mobile-trading apps we’ve seen, and includes streaming video and options quotes. As the year goes on, E*Trade plans to improve its mobile applications further; the firm is being rewarded by a huge increase in trades placed via mobile devices. Portfolio margining is in beta test and should be available by summer.

Cons: The Website could still use some streamlining, as navigation is occasionally confusing. Too much segregation of toolkits on different platforms.

What’s still to come? More investment opportunities; more mobile applications; more integration of various tools onto a single site; and more education to support those intrepid investors who’ve sworn off full-service brokers. Oh yes, there’s likely to be some more price cutting as well.

ChoiceTrade (http://www.choicetrade.com) 3½ stars

Pros: Its recently-launched Web platform update, Flex Trading, is aimed at less-experienced traders who still want a lot of tools. The application is modular, encapsulated in widgets that you can move around and resize. Very nicely designed trade ticket for stocks and options. Downloadable application routes orders very efficiently. Low-end Web platform is rather sparse; customers should bypass that in favor of the Flex app.

Cons: Minimal feature crossover from one platform to another. Pricing is different for Web platform versus direct access.

Muriel Siebert & Company (http://www.siebertnet.com) 3½ stars

Pros: Excellent fixed-income resources, backed by a conservative and financially stable firm. Clients have access to numerous original bond issues and receive personal attention when adding to their fixed-income portfolios. Firm has very low margin fees. Muriel Siebert, president and CEO, says, “Siebert has a special appeal to investors for whom peace of mind, safety, security, a variety of alternatives for diversification and a choice among multiple research and analytic tools mean more than paying the lowest commissions.”

Cons: Published pricing structure is very high though company officials insist that fees are negotiable. Website navigation is difficult.

Lightspeed Trading (http://www.lightspeed.com) 3½ stars

Pros: Low fees for stock and option trading make this an attractive place for very active traders. Range of offerings increased this year with the addition of foreign-exchange and complex options, plus Lightspeed Spotlight, an online social-networking community. Very fast trade executions and good customer service.

Cons: No bonds or mutual funds, but that’s not the customer they’re trying to attract. Must choose either Web or direct-access platform as customers cannot switch back and forth at will.

Charles Schwab (http://www.schwab.com) 3 stars

Pros: A wide range of products that can be traded. StreetSmart Pro, Schwab’s direct access software platform, offers some terrific filtering tools and the ability to enter conditional orders and some complex options. Schwab has many offices around the country, a plus for those who want face-to-face contact. Live-education events are well-run.

Cons: The Website is feeling dated, and navigation gets more difficult as new features seem to be tacked on rather than incorporated into the structure.

Scottrade (http://www.scottrade.com) 3 stars

Pros: Added a huge amount of educational resources, both online and in branches. Nearly 450 offices around the country that provide customers with a local resource for education and support. Rodger Riney, Scottrade’s founder and CEO says, “We have always focused on providing exceptional customer service and feel it is important to have branch offices where our customers live and work.” Just added some international trading.

Cons: Separate platform (provided by OptionsHouse) for complex options trading. Like several other brokers, there’s no single place to go to make use of all the firm’s offerings.

Zecco (http://www.zecco.com) 3 stars

Pros: Much improved Website along with company focus on improving support. Quote display, plus access to enhanced research, are much easier to use. Zecco added options features in the last year. We also appreciate the display of insider-trading activity on price charts. The Zecco community is nicely integrated into the new Web platform, including the ability to share screeners. First 10 stock trades per month are free for accounts with $25,000 or more.

Cons: Can trade forex but it’s a separate account. Unable to enter conditional orders.

SogoTrade (http://www.sogotrade.com) 3 stars

Pros: Added options trading in the fall of 2009. The options platform includes streaming real-time chains, multi-leg strategy chains, integrated analytics, price modeling, risk/reward assessment, and education in partnership with the Options Industry Council. Commissions are well below average. SogoTrade has launched their Webinar education series and plans to add to it as the year goes on.

Cons: Cannot trade mutual funds or bonds. No conditional orders.

Terra Nova (http://www.tnfg.com) 2½ stars

Pros: Offers the RealTick platform to customers, which was one of the pioneers in providing streaming data and charts. RealTick has a lot of competition now. InstaQuote platform offers a variety of order types and options analytics.

Cons: The firm has no proprietary platforms and recently dropped one of its third-party trading applications, forcing a migration of the remaining customers to a different platform. All platforms carry fees of $100/month and up, depending on trading level. There are better deals out there.

Just2Trade (http://www.just2trade.com) 2½ stars

Pros: Low commissions and margin fees. J2Trader added real-time streaming quotes in 2009; streaming charts will be added by summer. Another addition this year is a mutual- fund screener. Just2Trade has Maxit tax accounting built in.

Cons: No complex options. J2Trader only allows 15 symbols per watchlist. Trading application is very basic.

Firstrade (http://www.firstrade.com) 2½ stars

Pros: Developing a new trading application, which will be launched in late spring. That’s a good thing because the existing Website is tired and in need of an update. Firstrade can be completely translated into Chinese, if desired.

Cons: Current trading application is outdated. All reports show delayed data rather than real-time.

Cobra Trading (http://www.cobratrading.com) 2½ stars

Pros: Cobra IQ and OmniPro platforms offer streaming quotes and charting. Phones are answered quickly and customer service is polite. You can set up a custom-commission schedule. Cobra brokers will help you locate securities to sell short.

Cons: Limited screeners and search tools. Cobra’s Web platform is extremely limited and has almost no tools. Software platform fees are high in comparison to other, more powerful, platforms.

Following the market buy, we tracked the execution and portfolio reports. We looked for pre-filled order tickets when selling a position, which eliminates possible errors during the closing process. After entering a limit-sale order, we examined the open-order reports and looked at ways to check the progress of the order, as well as ways to adjust the limit price or cancel the order. We also placed options orders, using options’ order-entry screens when available. We also examined mutual-fund, bond, and (when available) futures, commodities and foreign-exchange order-entry screens.

An overall score of 5 in Trade Experience means the order entry-and-execution process flowed easily from one step to the next, with real-time information (including buying power and margin balance) available when needed.

Trading Technology: The availability of price-improvement strategies and smart-order routing technology (which finds the best bid or offer) were necessary to earn a 5 in this category. Brokers offering price improvement—a sale above the bid price, a buy below the offer—received a fraction of a point depending on the portion of their transactions that benefited. Top marks were earned by brokers who offered a wide array of order types, including conditional orders. The ability to place a trade from a graph earned a fraction of a point. In addition, we looked for ways to customize the trading experience, such as setting a default number of shares or contracts, to speed order entry.

Usability: A 5 here means the site or program was easy to use and well-designed, didn’t bog down when moving from screen to screen, and can be tailored to the user’s needs. Constant availability of a trading ticket, and easy access to research and account status data is key. Being able to easily switch from one area of the website or program to another is key here, as are customization options. 

Range of Offerings: We awarded points for the diversity of investments that can be traded online, with partial points given for those that can only be traded offline. Since all the brokers allow long and short stock-trading, as well as single-leg options orders online, we don’t award points for those transactions. We asked brokers how many stocks, on average, their customers can sell short, and awarded up to a half-point based on their answer. Complex options trading, and the availability of mutual funds, bonds, futures, commodities and international trading were also considered. A 5 in this category means you can execute all of these transactions online.

Research Amenities: This category measures the quality and accessibility of research, quotes and charting. We looked for research, news and charting linked to a customer’s portfolio and watch lists; the quality of third-party research and its integration with the rest of the site; and the availability of screeners, with special emphasis on options-strategy screeners. Brokers also won points for offering real-time streaming quotes at no additional cost, powerful charting capabilities, and Level II quotes.  Partial credit was awarded for features that generated an extra fee. 

Portfolio Analysis and Reports: The emphasis here is on clearly laid-out reports, updated in real time, showing current balances, positions and margin status. Portfolio-analysis reports, with links to news and research, as well as extensive transaction history, are most desirable. Tax reporting also falls in this category. Full credit is given for reports that can be created on the broker’s website, with no additional fees or data entry required.  Partial credit is awarded to brokers that populate services such as GainsKeeper and Maxit (tax analysis and reporting programs) for an additional fee.  This year, an additional consideration was the availability of a trading journal, allowing the user to capture market conditions at the point of the trade and take notes on the thinking behind entering that order.  A Barron’s reader requested this feature. 

Help and Customer Access: We sized up online help such as live-chat capability, user guides and frequently-asked-question files. Offline help was assessed by making calls to customer service, and weighing the brokers’ reports of the average time spent on hold when a customer calls in. We took a look at the education offerings, both online and live. The ability to visit a broker in person, and to access the account via a mobile device, is taken into account here. This year, we increased the points awarded for mobile access in this category.

Costs: We looked at commissions for stock and options trades and margin interest rates, giving more points for lower costs. We scaled the points awarded so that the lowest costs in the group earned the maximum number of points, with fractions (and occasional zeros) given to the more expensive brokers. Stock commissions are the biggest factor here, but options and mutual-fund transaction fees are also considered. A 5 could be earned here by very low stock and mutual-fund commissions, $5 or less for 10 options contracts, margin interest rates below 2.5%, and no account-maintenance fees. 

I think that if some other writer is using my survey as a base document that the LEAST he could do is re-word the questions he’s stealing from me.  I do not think it’s a strange coincidence that we both ask this exact question:

“Average # STOCK Retail Trades per Day, quarter ending 12/31/2009”

His survey includes my caps, and the same time frame.  Even more damning, further down his survey contains this question, which is an exact copy of a question that I’ve been asking for a few years now:

“Is a real-time quote available before the trade is placed?  Does the quote appear when a ticker symbol is entered in the trading screen, or does the customer have to enter it elsewhere on the site?”

His survey also copies, word for word, a series of questions I ask about SIPC coverage and limits.  His survey has a lot of questions I don’t ask, mostly about mutual funds and managed accounts, but those are details that Barron’s readers have not asked me to consider in my 15 years of writing this story.  But there is just one section of his survey that has original questions—all the rest are either directly copied from mine, or only lightly edited. 

A lawyer friend tells me that there are copyright issues involved here, and I’m trying to decide what to do next.  This week I’m finishing up the 15th Annual Review of Online Brokers for Barron’s, which will be in print in the March 15 issue, so I don’t have a lot of free time. 

I’ve found many of my articles reproduced without permission here and there on the web; usually a request to the webmaster to take down the article does the trick.  But this time a source document of mine that has never been published in public is being used.  Maybe the other writer thought I wouldn’t find out about it?  I just cannot imagine a universe where someone would think this is OK. 

OK ... back to work! 

For example, users of Intuit’s 2009 TurboTax Premier, while trying to input their transactions, will not find “options” as a menu choice. Options transactions fall into the “Other” category, which means more mouse clicks are needed to get the information entered. Options are considered securities by the IRS, so gains are subject to the same kinds of treatment as gains on stock transactions. The problem most programs have with processing options transactions is dealing with their symbols, and matching up the entry to the correct exit from the trade.

As a couple of online brokers pointed out to me, the IRS does not yet require them to report options transactions. Your 1099 from your broker includes your total proceeds from sales of stocks, mutual funds, and bonds. That left it up to the individual to report options transactions. It’s difficult to measure the “tax gap” that likely resulted from not reporting gains on options transactions over the years.

That all changes in the next couple of years. Once brokers are required to report options transactions to their clients and to the IRS, I’m hoping that tax software helps traders make these calculations. Got that, publishers?

SmartStops nearly two years ago debuted a service that recommends exit strategies for stocks ("A New Way to Tell When to Fold ‘Em,” July 7, 2008). It’s just added Reentry Alerts to tell you when it might be safe to get back in.

SMARTSTOPS (http://www.smartstops.net) uses proprietary algorithms that categorize the overall market into up, down, or sideways movements in order to help calculate the best exit points for individual stocks. The service costs $9.95 per month for 10 stocks, and up to $99.95 for 100 stocks, with a 20% discount for an annual subscription.

For an additional $5 per month for every 10 stocks covered, Reentry Alerts signal when the risk profile of the equity you’re following has returned to normal. An e-mail alert will be sent to you to let you know you should take another look at this stock, and possibly buy it back or take off any protective hedge you had put in place. The service doesn’t tell you what stocks you should trade; you have to enter the list of stocks to follow manually.

IN PUTTING TOGETHER this year’s edition of Barron’s Best Online Brokers we’ve come across a number of interesting tidbits that we can share with you before the rankings are released in mid-March.

MURIEL SIEBERT AND CO. (http://www.siebertnet.com) has introduced a program to help clients with large positions in difficult-to-locate shares earn a little loan income from them. Positions must be more than 50,000 shares or valued above $100,000, and they must be fully paid for or exceed any margin debit in the account. Clients who decide to lend these securities to Siebert’s clearing firm can receive the income based on market value and supply/demand conditions. In addition, Siebert customers can now use add-on Trusteer Rapport Desktop Security Software to protect themselves from any phishing or spoofing attacks they might receive from Websites they visit.

ZECCO (http://www.zecco.com), which has made a push to improve customer service, has boosted staffing levels by 20% and extended help operations by 18½ hours per week. Over 95% of Zecco’s reps now hold a Series 7 license, a major gain from previous years. Zecco also added live chat in early 2009; CEO Michael Raneri says it’s popular with customers and helpful in reducing response times.

MB TRADING (http://www.mbtrading.com) acquired former partner WizeTrade, a Dallas-based community for traders that has been rebranded MBT World. In addition, its next generation product offering, now called MBT Lightwave, allows traders to create a variety of strategies, back-testing and then sharing them with the community of traders and MBT customers. The firm’s entire suite of software applications received at least one major update during 2009, including an advanced options platform. MB Trading reduced commissions for options, foreign exchange and futures.

TRADESTATION (http://www.tradestation.com) just launched TradeStation Strategy Network, a searchable online marketplace of ready-to-trade strategies assembled by independent third-party developers. TradeStation clients can sort, rank and compare trading strategy products by asset class, risk level, frequency of trading, historical return percentages and other criteria. After identifying an appropriate strategy, clients can subscribe, download it to their TradeStation platform and start using it in simulated or live trading.

TRADEKING (http://www.tradeking.com) expanded its Webinar and All-Star blogger programs while expanding its Online Learning Center. The second edition of The Options Playbook, written by TradeKing’s “Options Guy” Brian Overby, is an entertaining and effective guide to options trading. The firm has also tested a new Trading Dashboard, which integrates a client’s trading activities with the site’s social-media functionality, and rolled it out to the entire client base in January 2010.

OPTIONSHOUSE (http://www.optionshouse.com) updated its research tools last year with the addition of Exchange-Traded Funds-centric research, technical analysis and back testing of strategies. In addition, the firm partnered with a third-party performance monitoring service in order to actively measure execution statistics. OptionsHouse also added a mobile application that runs on a broad range of devices, including the iPhone and BlackBerry, with real-time access to accounts and trading.

Published in Barron’s, March 1, 2010.