Saturday, November 20, 2010
Online Brokers Eye One Another
IS ANOTHER WAVE OF broker consolidations rolling toward shore? In late October, Lightspeed Financial (lightspeed.com) completed its acquisition of Terra Nova Financial, bringing its active-trading client base to over 8,500 accounts. That doesn’t sound like much, but those accounts are trading at a very rapid pace—over 220 million equity shares a day.
Rumors have come and gone for years about a link between E*Trade (etrade.com) and TD Ameritrade (tdameritrade.com). Most recently, reports that Charles Schwab (schwab.com) is an E*Trade suitor generated a bump in E*Trade’s stock price. The two firms declined to comment. With trading off earlier in the year, there’s bound to be more pressure to acquire.
A Securities and Exchange Commission filing in early November detailed an investment made by Thomas Peterffy, CEO of Interactive (interactivebrokers.com) in rival TradeStation (tradestation.com). Peterffy purchased nearly 2.6 million shares of TradeStation stock, or 6.3% of the outstanding shares.
To me, this appears to be an unlikely marriage. Though both Interactive Brokers and TradeStation appeal to active traders, their platforms are extremely different. TradeStation, which recently launched version 9.0 of its platform ("What’s New at Online Brokers?” Oct. 30), is designed for traders who want to build their own trading systems based on backtesting of data. Interactive Brokers is clearly aimed at traders interested in minimizing their costs; their platform isn’t as pretty as TradeStation’s.
There are similarities, though. Both firms have extensive connections to international markets, and both have very efficient order-routing technology as well as the ability to construct extremely complex orders. Both platforms are downloadable software programs, as opposed to Websites where you sign in. Both companies are run by people I consider market visionaries, though their visions differ considerably.
Does this stock purchase herald a hostile takeover? Neither Interactive Brokers nor TradeStation would comment. Peterffy’s filing says the shares were bought for “investment purposes.” The filing also says, once the legalese is translated to English, that Peterffy reserves the right to consider strategic alternatives with TradeStation and other parties. We will keep you up to date.
FIDELITY INVESTMENTS (fidelity.com) conducted a poll in late September that shows that approximately one-third of its actively trading customers are optimistic about the domestic markets, believing the S&P 500 will gain another 100 points, or 8%,by year end. About half expect the index to remain stable.
“This is our sixth poll of active investors in the past 18 months, and during that time they have been bullish in their market outlook, and the market has generally met their expectations,” says James C. Burton, president of Fidelity’s retail brokerage unit. “This most recent poll finds active investors even more positive than they have been in the past; from expectations of higher personal returns to a renewed confidence in equities, they are re-engaged and repositioning their portfolios accordingly.”
Fidelity’s retail brokerage clients have increased their new investments into individual equities 14% year-over-year through September. Options trading at Fidelity increased 11% in that time.
Owing to increased interest in tangible assets, Fidelity recently rolled out a new precious-metals investment page, at http://www.fidelity.com/metals. The page includes information about precious-metals trading opportunities, direct telephone access to Fidelity precious-metal specialists and storage and insurance options.
I’VE DOWNLOADED A COUPLE of enjoyable iPad apps recently, including Thomson Reuters MarketBoard 1.3 (free) and StockWatch–iPad Edition ($5.99).
StockWatch has had an iPhone version since 2008; in early November it published an iPad-specific version. You can sync your watch lists and portfolios between devices, and track an unlimited number of stocks, bonds, mutual funds, futures and options. It even lets you track tax lots and add notes.
I like the full-screen technical charting capability and the news feeds. My only gripe is that the data feed comes from Yahoo Finance, so it’s delayed by 15 minutes. If there was a way to get real-time data into this app, it would be even more useful.
Thomson Reuters MarketBoard is especially useful for subscribers to the Thomson ONE service, but even if you aren’t don’t, it lets you pick up news and SEC filings on the companies you want to follow. The display is crisp and nicely laid out. Well worth picking up, especially since it’s free.
Published in Barron’s, November 15, 2010.