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.