Saturday, December 10, 2011
Fidelity Polishes Its iPad App
The brokerage and fund giant upgrades its tablet app and adds two algorithms for heavy traders. More from Just2Trade, too.
The Electronic Investor has been barraged by small bits of interesting news from Fidelity Investments over the past couple of months. Rather than report on the new mobile and desktop features in the firm’s trading platform one by one, we decided a summary would work better for everyone.
The Pew Research Center estimates that 11% of American adults own a tablet computer, and online investors have been particularly eager adapters. Fidelity, which has offered some excellent mobile apps for years, estimates that one-third of log-ins from this group already come from an iPad. This new, improved app ought to increase that percentage for the fund and brokerage giant (http://www.fidelity.com).
“Given the rapid adoption of tablet computing in the last year and a half, it became especially important for Fidelity to extend its leadership position by evolving our iPad app to take full advantage of this mobile platform,” says Richard Blunck, executive vice president of digital distribution.
Available for free from Apple’s app store, the application launches with a map that shows market movements around the globe. Qualified frequent traders—those trading 120 times or more in the previous 12 months–can access real-time streaming quotes from the iPad app; those who aren’t eligible must refresh the page to get updated quotes.
NEWS STORIES, supplied by Thomson Reuters, Barron’s sister news provider MarketWatch, Kiplinger, CNNMoney.com and TheStreet.com, display on the main news page, and are also linked to watchlists and account positions. There is some video content available, along with pre-opening and post-closing news, also provided by Thomson Reuters. You can add your favorite financial news feeds to the Fidelity app as well. The latter is a nice feature that benefits the big investment company by keeping you on the application, with its trading buttons within easy reach.
Fidelity’s charting feature is elegant, though others go a lot further (and are considerably more expensive) on the iPad. You can view up to three charts on a single screen, and add technical indicators from a limited list. Third-party research content, including the Bull and Bear of the Day from Zacks Investment Research, Recognia AlertWire, and other sources are available. In addition, the day’s most heavily traded stocks by Fidelity customers can be displayed.
You can view a demo of the updated iPad app by checking out the video at http://www.fidelity.com/newapp.
SHIFTING OVER TO YOUR DESKTOP computer, Fidelity introduced two professional-grade trading algorithms to its downloadable software platform, Active Trader Pro. Customers are eligible to use Active Trader Pro if they’ve traded at least 36 times in the previous 12 months; they can get the algorithms with 120 trades. These algorithms, Volume Weighted Average Price (VWAP) and Target Volume (TVOL), automatically enter orders for you based on a specific set of instructions. These tools are typically not available to retail traders other than at online brokers like Interactive Brokers (http://www.interactivebrokers.com), which cater to very active traders.
“Algorithms are computer programs that execute large orders over time with the goal of optimizing execution costs and managing risk,” explains Derrick Chan, vice president of financial engineering and electronic trading at Fidelity. “These trading strategies, coupled with Fidelity’s expansive liquidity network, can be useful for larger orders which might otherwise experience significant market impact if they were submitted to the market all at once,” he adds.
The VWAP strategy is designed to get you the average volume-weighted price from the time you enter your order to the end of the trading day. One way to think of it is dollar-cost averaging over a short period. The TVOL algorithm is similar, but traders have more control over the pace at which their order is executed by allowing them to choose a target participation rate of 5%, 10% or 20% of volume in a given stock over a period of time. They can switch off the algorithm at any time.
Obviously, these are trading strategies designed for very large blocks of stock. Though VWAP and TVOL execute trades in multiple steps, Fidelity charges a single $7.95 commission.
Fidelity supplied us with some interesting price improvement statistics. They showed that approximately 80% of 1,000-share orders entered between January and September 2011 were executed at a price better than the national best bid or offer (NBBO), with an average savings per order of $3.62. That’s an impressive chunk of change. The industry average price improvement was 34 cents for a 1,000-share order during that same stretch.
JUST2TRADE (http://www.just2trade.com), which prides itself on its rock-bottom $2.50 commissions, has updated its platform with streaming charts and complex options-trading tools.
Launched in October, the streaming charts can be found under the research tab if you select “Tick” as the time period. You can create up to five charts, using a tab in the charting window, and compare as many as three symbols in each. Your watchlist and portfolio positions display on the side bar; you can quickly add one of those symbols to a chart just by clicking on a check box.
More than 60 technical indicators can be included in any chart, and a variety of drawing tools are available. Of note is the ability to enter an order from a chart; if you right-click, an order ticket opens up, pre-populated with the selected price.
Complex options, which launched in June, allow you to select and trade contracts with up to four legs. Options trades are $2.50, plus 50 cents per contract. There also are options pricing and probability tools, supplied by iVolatility. They’re useful when deciding which option contracts to trade.
Is the expanded functionality a prelude to higher commissions? CEO Fuad Ahmed insists that it’s not. Just2Trade isn’t “thinking of raising our prices. That’s not up for discussion. Our pricing is $2.50, and will stay $2.50.”
Published in Barron’s, December 5, 2011.