Active Trader Programs: Is a Recovery in Sight?

July 14, 2003

Abstract

Boston, MA, USA July 14, 2003

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Celent Communications estimates that active traders account for almost 80% of the trades executed at online brokerage firms, and Celent expects that number to continue to rise.

In the last three years, trading revenues fell precipitously, and brokerage revenues followed suit. As buy-and-hold investors lost their appetite for buying and selling stocks, online brokerage firms became that much more dependent on the revenues generated by a small group of their customers, the active traders. In a new report, ?, Celent examines the state of the active trader services industry and the broad initiatives brokerage firms are taking in order to increase their market share.

The stock market crash had a profound effect on all investors, including those who trade most frequently. Diminishing prices brought diminishing returns to those who tried to profit from short-term gains in the market. However, while the number of active traders has declined in the last three years, the overall participation of active traders in the market has increased relative to non-active traders. "Active traders are indisputably valuable to brokerages, which is why those firms have continued to devote plenty of resources to this segment of their customer base," says Adam Josephson, research associate in the securities and investments group at Celent and lead author of the report.

The report profiles the active trader programs at five leading online brokerage firms: Ameritrade, BrownCo, Charles Schwab, E*TRADE, and Scottrade.

As trading technology improves across the board, online firms have become increasingly competitive on price, yet price is still the major differentiator among the players profiled in the report. Moreover, as investors become more comfortable handling their financial affairs online, the number who trade online is likely to increase. In fact, the rapidity with which retail investors have returned to the market in the last three months has surprised even the brokerage firms themselves, and has reinforced their belief that the active trader segment will be exceedingly profitable for years to come.

A is available online.

of Celent Communications' Retail Securities & Investments research service can download the report electronically by clicking on the icon to the left.  Non-members should contact info@celent.com for more information.

        

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Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

 

Boston, MA, USA July 14, 2003

Active Trader Programs

Return to report Abstract

 

EXECUTIVE SUMMARY 3
INDUSTRY OVERVIEW 4
  Market Outlook 4
  What is Active Trading? 6
  Active Traders Remain a Hot Commodity 6
  Different Strokes for Different Folks 8
  Less Appears to be More 8
  Continuing Investments in Technology 9
LEADING ACTIVE TRADER PROGRAMS 11
  Ameritrade 11
  BrownCo 15
  Charles Schwab 16
  E*TRADE 19
  Scottrade 22
COMPARISON OF ACTIVE TRADER PROGRAMS 24
CONCLUSION 28

 

        

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