Online Brokers' Hidden Gems

LAST WEEK BARRON’S RAN its 12th annual ranking of the best online brokers. Although we offered complete rankings of 29 software- and Web-browser-based services and discussed the seven leading firms in some depth, we had no choice but to leave sketches of some other worthy brokers on the cutting-room floor. Below are profiles of several that garnered 3½ or more out of five possible stars, and that merit your consideration.

CHOICETRADE, one of the two four-star brokers here (CyberTrader is the other), is a small firm that offers traders three distinct platforms. The one with the most features is BonTrade, which is designed to comply with Regulation NMS, the rule intended to assure more transparent and better market pricing, that started to go into effect last week. This platform boasts a Web-based audit panel demonstrating that an order received best execution.

BonTrade’s OptionVision tool lets the user graph actual volatility of an underlying stock against the implied volatility defined by market makers. Time frames are customizable, and the user can include a variety of strike prices. As a result, you can see when options are cheap, or when it might be best to sell. The BonTrade platform is $60 a month; ChoiceTrade clients also can choose a less expensive software platform, or use its Web-based system and pay per-transaction commissions.

CYBERTRADER, Schwab’s software offering for hyperactive traders, relaunched last year with more emphasis on ease of use. The platform still has dynamic streaming charts and other tools, but they can now be accessed from a “floating” menu that lets you move windows and dock them where you want. Chart-building is faster. A welcome new item is the Balance Bar, which customers can put anywhere on the screen for viewing real-time information like a daily P&L and margin balance.

Schwab’s Website has added new tools providing nearly real-time reports of gains and losses for those with more than $100,000 in household accounts. (Investors with less get 20-minute-delayed quotes.) But some positions don’t show up on a P&L until the day after a trade. Frankly, this reporting tool, though improved, still asks too much of the user.

E*TRADE has been busy. After folding BrownCo and HarrisDirect customers into its platform, the acquisitive firm launched futures and global stock trading. Clients looking for advice about their investments can run the Intelligent Investing Optimizer, which makes recommendations based on responses to eight profile questions. Another new tool we like is the Risk Analyzer: It lets you weigh your investment choices’ possible risks and rewards against your objectives.

Research and reporting are very well done on all E*Trade platforms.

The broker’s active investor software program, E*Trade Pro, now has enhanced charting and new technical studies. The charting application also lets you enter an order by double-clicking on a price. Plans are in the works for technical screening and backtesting. By the end of March, Nasdaq TotalView, which offers detailed price and order information on the exchange’s stocks, will be included in the Pro platform.

OPTIONSHOUSE is shiny and new (see “Signs of a Bull Market: New Brokers"), and doing a lot of things right. The brokerage is built on data from its parent company, market maker Peak6. A new tool as of a couple of weeks ago is the Risk Viewer, which has three tabs (P&L, Greeks and Market Exposure) that show portfolio risk by industry, by expiration or by symbol. The firm added mutual funds just last week. From what we’ve seen, you can expect a lot of interesting technology from this site.

SCOTTRADE launched its new quote and research section, free to customers, in mid-February. These offerings doubled the amount of research available, including additional news feeds and an ETF center. No matter where you are in the Quotes and Research area, if you hover over a ticker symbol you get a small graph, a real-time quote, and links to trading. Customer service is good. This is a solid brokerage for the cost-conscious, long-term investor. It would jump in our ratings if it added some advanced order types, and more customizable features and tools for trading complex options.

For more active traders, the firm offers ScottradeELITE, its software platform. This is an easy-to-use streaming platform that’s not as daunting as others.

Another plus, amid all the annoying changes caused by consolidating brokers, Scottrade says it has no plans to go public or sell out. That alone makes it a good bet for electronic traders.

Posted by on 03/17 at 05:10 PM

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