Europe South Asia Asia Pacific Americas Middle East Africa BBC Homepage World Service Education

Front Page



UK Politics







Talking Point

In Depth

On Air

Low Graphics

Friday, April 23, 1999 Published at 14:44 GMT 15:44 UK

Business: The Company File

E*Trade challenges offline brokerages

ETrade has used a portal model to build a financial services site

By BBC News Online's Kevin Anderson in Washington

Investors have pushed the Dow Jones Industrial Average over the 10,000 points level, and in the first quarter of 1999 they made even more of those trades on the Internet.

Online trading volume rose 30 to 35% to about 450,000 trades a day, according to Bill Burnham of Credit Suisse First Boston.

During the same time, overall market volume rose only 5%, which means that online brokerages continue to win market share away from traditional brokerages.

The rise in online trading has sent the shares of online brokerages such as E*Trade to record highs.

They are actually so high that the company announced now has announced yet another two-for-one stock split.

In its advertising campaign, E*Trade says, "Someday we'll all trade this way," and according to the Wall Street Journal, 25% of all retail stock trades are already taking place on the Internet.

E*Trade was one of the first online financial services companies. William Porter founded the company that would become E*Trade, Trade Plus, in 1982.

At the time, Trade Plus offered online quote and trading services to Fidelity, Charles Schwab and Quick & Reilly.

In 1992, Mr Porter founded E*Trade Securities, offering online investing services through American Online and CompuServe, and four years later, the company launched

Phenomenal Growth

Mr Porter had the vision of online trading more than a decade before the World Wide Web would offer the technological opportunity for him to realise his vision, and the early start gave E*Trade a strong position amongst competitors.

By the end September 1998 E*Trade was the second largest online brokerage firm, trailing only Charles Schwab. During the last three months of the year the site added 132,000 new accounts.

The growth has come at a cost. During an system upgrade to deal with the increased traffic, the site suffered outages for three days in February, causing some frustrated users to dub the site "E*try-to-trade."

Due to the outages, the Securities and Exchange Commission has increased its scrutiny of online share trading.

Despite the technical difficulties, the company added 233,000 accounts during the first three months of 1999. That was an increase of 77% from the previous quarter.

The company said they processed on average 70,000 transactions per day, a 63% increase from the previous quarter.

Future directions

The wild success of online brokerages has caused a proliferation of sites.

When E*Trade spokeswoman Sherri Arapov first joined the company two and a half years ago, E*Trade had only five competitors, she said. Now, she said there are more than 80 online brokerages.

E*Trade has been one of the few profitable Internet sites, posting a first quarter 1998 profit of almost $1m. However, the company has now chosen to add some red ink to its books, to pay for acquisitions and building its brand name.

As competition increases, E*Trade is trying to distinguish itself from all its competitors.

The company investigated the market extensively before launching a suite of services last fall. Price was not as great a factor as access to information.

[ image: Volume traders gain access to additional services]
Volume traders gain access to additional services
The customers "wanted us to once and for all level the playing field between themselves, the individual investor, and the institutional investor," said Jim Safka, who helped developed the sites Destination E*Trade services.

Higher volume investors are given access to services such as premium news, analysis and stock data for free.

Using the Internet portal model, E*Trade wants to position itself as a "digital financial media company," said Lisa Nash, vice president of customer management.

[ image: ETrade will add services for handheld devices]
ETrade will add services for handheld devices
The web site is only the first step. As the technology becomes available, E*Trade plans to add interactive services for high-bandwidth Internet users, subscribers to wireless services and television viewers.

E*Trade will be one of the services available to Palm VII users as soon as the wireless Palm Pilot becomes available.

At first, users will only be able to access quotes and news, but Ms Nash said that they want to allow users to trade using their Palm Pilots.

"We want to make the relationship as broad, as deep and as sticky as possible," Ms Nash said.

E*Trade abroad

E*Trade also has international ambitions.

E*Trade has adopted a franchise model with web sites in other countries to help serve customers in 119 countries.

The company already has franchises in Canada, Australia and France, and plans to launch sites in Korea, Japan and Central Europe.

Advanced options | Search tips

Back to top | BBC News Home | BBC Homepage | ©

The Company File Contents

Relevant Stories

16 Dec 98 | Sci/Tech
UK launches e-commerce initiative

04 Dec 98 | Sci/Tech
Wanted: e-Envoy to lead business revolution

04 Feb 99 | The Economy
Inquiry into online trading

09 Feb 99 | Your Money
All in a day's work

15 Oct 98 | Your Money
Share dealing: an Online revolution

Internet Links


Internet Broker Scorecard

PC World: Online Brokers

The BBC is not responsible for the content of external internet sites.

In this section

Microsoft trial mediator welcomed

Vodafone takeover battle heats up

Christmas turkey strike vote

NatWest bid timetable frozen

France faces EU action over electricity

Pace enters US cable heartland

Mannesmann fights back

Storehouse splits up Mothercare and Bhs

The rapid rise of Vodafone

The hidden shopping bills

Europe's top net stock

Safeway faces cash demand probe

Mitchell intervenes to help shipyard

New factory creates 500 jobs

Drugs company announces 300 jobs

BT speeds internet access

ICL creates 1,000 UK jobs

National Power splits in two

NTT to slash workforce

Scoot links up with Vivendi

New freedom for Post Office

Insolvent firms to get breathing space

Airtours profits jump 12%

Freeserve shares surge

LVMH buys UK auction house

Rover - a car firm's troubles