E*Trade Says Online Trading Picking Up

August is traditionally a quiet time on Wall Street so it should come as no
surprise that E*Trade says its seeing a rebound in online
trading in the first few days of September.

On Wednesday, E*Trade said that its U.S. customer online trading volume fell
by 15 percent in August, and increased by 36 percent during the first nine
days of September.

E*Trade said that the U.S. daily average number of trades per day was
64,117, a drop from an average of 75,453 per day during the month of July.
E*Trade said its total number of active accounts increased to 3.6 million in
August, but based on the companys own statistics a small percentage of
those online trading accounts are actively making stock and other
revenue-based trades on a daily basis.

“While trading activity in the U.S. eased as expected in August, volumes
have rebounded sharply in September,” Jarrett Lilien, E*Trade’s president,
said in a statement.

E*Trade’s slump in trading traffic mirrors a similar trend for “total
worldwide activity” where August averaged 113,405 revenue trades per day,
the company said. But the company added that through Sept. 12, E*Trade’s
total daily average revenue trade are up 10 percent in the third quarter
over the second quarter numbers.

Lilien went onto say “given the highly variable expense structure in our
mortgage operations, we have been able to respond quickly to this
anticipated decline in borrowing activity by taking the appropriate steps to
reduce costs.”

E*Trade’s stock price has nearly doubled in the past year and was trading
close to $10 on Wednesday. The company also said it expects to meet Wall
Street’s profit estimates, analysts polled by Reuters Research on average
expect third quarter profits of 15 cents per share on revenue of $389.7
million.

E*Trade’s release about data concerning an uptick in online trading volume
follows on several other firms stating similar trends.

E*Trade rivals Charles Schwab Corp. and Ameritrade Holding
Corp. both said they are seeing a pickup in online
trading activity.

On Tuesday, Schwab said it could potentially beat Wall Street estimates and
also said it is reducing online equity commissions for clients who trade
more than 30 times a quarter to $14.95, putting price pressure on
competitors, and potentially its own margins.

Schwab said its daily average client trades totaled 181,600 in August, which
is an 8 percent increase over the same month last year, but down 12 percent
from July volumes. Schwab said its online trading volume is up 29.3 percent
in September.

On the other hand, Ameritrade said its daily online trading volume was down
14.9 percent in August, compared with July.

As general market activity picks up in September, so are the volumes at the
online trading firms, and possibly a long overdue recovery in the sector.

In the past few years, as online trading slumped, so did the number of
brokerage firms offering services from over 200 at its peak, to less than
75, at present.

But recent financial results from both E*Trade and Ameritrade point to
encouraging signs for the sector. Recently, Ameritrade said for the second
quarter ended June 30, average daily volume was 154,300 trades, up 33% from
the first quarter. E-Trade’s average daily volume, 116,700 trades, was a 35%
increase.

Analysts say that the online trading companies bottomed out with the trough
in volume in the first quarter of 2003, but there appears to be steady
growth in the overall activity, and the diversification of services.

On Sept. 3, E*Trade’s vice president for Asia Pacific said the company
is considering setting up an office in China to look into the potential
opportunities, if the government were to loosen overseas investment rules.
Today Chinese citizens on mainland China are prohibited from trading foreign
shares. Chinese state newspapers published a statement saying “any and all
investment in an overseas index is illegal and could spark legal
proceedings.”

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