BBC Homepage World Service Education
BBC Homepagelow graphics version | feedback | help
BBC News Online
 You are in: Business
Front Page 
World 
UK 
UK Politics 
Business 
Market Data 
Economy 
Companies 
E-Commerce 
Your Money 
Business Basics 
Sci/Tech 
Health 
Education 
Entertainment 
Talking Point 
In Depth 
AudioVideo 

Thursday, 10 August, 2000, 10:53 GMT 11:53 UK
Day traders 'lose thousands'
Nasdaq market site
The Nasdaq market site - favourite hunting ground for many day traders
Day traders, investors hopping in and out of shares to make quick profits, rarely make money and sometimes lose tens of thousands of dollars, a US investigation has found.

Day traders hope to exploit small share price movements during a trading day, holding stocks just for a few hours or even minutes.

But the Senate Governmental Affairs Committee found that brokers, rather than investors, profit most from the practice.

"Day trading clearly is a gamble for most traders, but not for the [day-trading] firms," said Susan Collins, a Republican senator, who chaired the committee. "They make money whether their customers do or not."

Dubious practices

Day trading brokers often accept unsuitable clients, who are unaware of the risks involved. And firms improperly transfer funds between customer accounts to allow loss-making investors to keep trading, the subcommittee was told at hearings earlier this year.

Witnesses included the mother of Scott Webb, who was one of nine people killed in a mass shooting by a fellow day trader in July 1999. Mr Webb had borrowed $30,000 shortly before his death, senators heard.

But the committee stopped short of proposing a ban on day trading, saying it was seeking to make brokers more accountable.

Senator Collins revealed earlier in the inquiry that, on average, day traders execute 29 trades a day through firms charging $16 per transaction.

"The average day trader must generate a minimum trading profit of over $450 each and every day just to break even," she said.

Brokers make millions

The revenues of day trading firms, meanwhile, rose by 276% between 1997 and 1999.

The first 15 brokers that gave evidence to the committee reported $144m profit between them during 1999.

Investors are often young. More than 40% of clients on one broker's list were aged 26 or less.

"Press reports have noted that day trading attracts many people because it is computer-intensive, fast paced and offers the tantalising prospect of quick riches," Senator Collins said.

The subcommittee's findings echo concerns raised by other financial watchdogs, including Britain's Financial Services Authority.

The FSA issued an investor alert last year, warning of the dangers of day trading.

Search BBC News Online

Advanced search options
Launch console
BBC RADIO NEWS
BBC ONE TV NEWS
WORLD NEWS SUMMARY
PROGRAMMES GUIDE
See also:

01 Mar 00 | Business
Online share tips warning
22 Jan 00 | Business
Share dealers warn of web rumours
01 Dec 99 | Business
Day trading comes to London
21 Oct 99 | Your Money
UK warning on day trading
30 Jul 99 | The Economy
What is day trading?
Internet links:


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

Links to more Business stories are at the foot of the page.


E-mail this story to a friend

Links to more Business stories