Charles Schwab and E*Trade Group, the two largest electronic brokerages, saw their shares of the online trading market fall in the second quarter as customers flocked to deep discount brokers, Credit Suisse First Boston said in a report.
Bloomberg News quoted the report as saying San Francisco-based Schwab’s share of online brokerage fell to
29.7% of total daily average trades from 31.6% in the first quarter. Palo
Alto, CA-based E*Trade’s share fell to 11.5% from 12.2%.
Both firms had jumps in daily trading volume. Schwab’s daily trades rose 9.6%
from the previous quarter to 66,000, while E*Trade’s rose 10.6% to 25,656. Those
increases lagged the overall growth of online trading, which rose 16.8% to
222,000 average daily trades in the second quarter.
“Firms with the lowest prices courting the most active traders saw the most
growth,” Bill Burnham, an analyst and author of the CSFB report, was quoted as
The biggest gainers were Iselin, NJ-based Datek Online Brokerage Services Corp., whose
market share rose to 8.5% from 6.8%, and Omaha, NB-based Ameritrade Holding Corp., whose share
rose to 6.9% from 5.9%.
Ameritrade charges $8 and Datek $9.99 for most Internet-based stock trades,
less than the $14.95 and $29.95 basic commissions levied by E*Trade and
A Schwab spokesman was quoted as saying the company is less concerned with its
share of online trades than with the growth of its electronic accounts and
assets. The firm had 1.9 million active online accounts at the end of July, up
700,000 from the end of 1997, and online assets of $132 billion, up $53
billion from year end, spokesman Tom Taggart said.
During the first seven months of the year, Datek more than doubled its
accounts to 105,000, said Alex Goor, the company’s president. Datek customers
make an average of about five trades per month, he said.
E*Trade officials couldn’t be reached, Bloomberg said.
The online brokerage industry is poised for what Burnham called “the mother of
all marketing battles” with several of the biggest firms planning advertising
blitzes. E*Trade, for example, recently said it would spend $100 million to
promote its Internet site as a source of financial information for computer
The analyst said the stocks of online brokerages probably won’t rise much
until the outcome of the marketing war is clear.
According to the report, the number of firms offering online trading rose from
the mid-60s to about 80 during the quarter. At the same time, the nine biggest
electronic brokerages increased their combined market share to 87.4% from
86.4% in the previous period.