Four-Star Brokers
Mar 27, 2006
A MERCEDES-S OR A BMW-7 SERIES MIGHT CLAIM to be the world's best sedan, but a Toyota Camry or Honda Accord might better suit your needs. So, too, with online brokers: In our recent annual rating (" Different Strokes ," March 6), the largest group of brokers scored four out of a possible five stars. Most excel in a specialty or two, but fall short in other areas. Yet your ideal broker may well be in this group. Here's a look at some four-star contenders. Browser-Based Brokers
Ameritrade's Apex ( www.ameritrade.com) offering continues to develop in depth and breadth. A few years back, Ameritrade typically was at the bottom of our rankings due to a narrow breadth of offerings and a clumsy Website, but the company has listened to criticism and worked hard to overcome it. One welcome update this year is the ability to link accounts for reporting and performance-evaluation purposes. You can link multiple accounts if there's an overlap in Social Security numbers; in the near future, it will be possible to link any 'permissioned' accounts, such as trusts and corporate accounts, that aren't tied by SSN. Ameritrade offers plentiful customization tools. The customization specifications are stored on an Ameritrade server, so even when you log in from a different computer, you'll get the view you want. As TD Waterhouse research offerings are integrated into the Ameritrade platform with the merger of the firms later this year, the site is apt to improve again.
Although it won't exist as a separate entity a year from now, TD Waterhouse's ( www.tdwaterhouse.com) TradeCentral offering managed to earn four stars. TradeCentral has a variety of tools available that rival those of some of the software-based brokers -- but it runs in a browser, so it's more portable. To use the platform, TradeCentral customers must trade 30 or more times in a rolling 90-day period, or have $500,000 in assets. They pay a flat fee of $9.95 for stock trades, and $1.25 extra per contract for options.
Fidelity ( www.fidelity.com) improved its options capabilities by adding an Options Research window. The Strategy Evaluator lets you compare different strategies by entering a few characteristics pertaining to what you believe will happen to the underlying stock. The site offers a variety of investment-research opportunities, with many enhancements made to stock, option, bond, mutual-fund and exchange-traded-funds research for retail investors.
Fidelity also got a big kick up in the rankings from a significant commissions cut. We assume a typical Barron's reader would be in the Silver category, which saw stock commissions drop to $10.95 per trade, and options commissions drop about 50%. The firm also eliminated its $50 annual fee and lowered margin rates, which makes it a much better deal now. There are still some glitches in the reporting arena, however, especially since account history can be viewed only in 90-day increments.
E*Trade's ( www.etrade.com) Serious Investor offering, for those who park more than $50,000 in assets with the firm, also earned four stars. Many of the pages on E*Trade's site now include slider bars, which allow you to change various assumptions quickly, such as risk and interest rate. Commissions have been slashed; the Serious Investor tier pays $9.99 for stocks, or $9.99 plus 75 cents per contract for options. The firm is folding a variety of Harrisdirect tools, such as Risk Metrics, into the site over the next few months, when the site will undergo another update.
E*Trade has worked to address customer-support issues, and has committed to expanding its physical presence in major metropolitan areas. An area of focus is aimed at picking up additional wealth-management firms to cater to high-net-worth customers. Michael Curcio, E*Trade Executive Vice President in charge of retail trading, says, "We're seeing the demand for complex trading instruments grow. We've devoted more development and services to this area."
Privately held Scottrade ( www.scottrade.com) is unlikely to be swallowed up in the merger wave that has rolled through the industry. But that's not what earned it four stars. The site underwent a serious overhaul just after our 2004 broker survey and now is considerably easier to navigate. It sports just four tabs for the main functional areas, while the old site had nine. Every resource is at most two clicks away. The home page shows all your important information in one place. "Customers like it," says president Rodger Riney. "They don't have to go digging around to find something like funds available for trading." This page provides a quick, elegant look at what's happening in the account. Gainskeeper's tax reporting is fully integrated into the site, at no additional cost. One drawback for options traders is the inability to enter complex options orders online.
Software-Based Brokers
RushTrade ( www.rushtrade.com), a small firm that offers three variations on its trading platform, lets you create and execute trading strategies as well as basket orders. Direct Plus offers Level I quotes, a variety of charting functions, and real-time account management. The Direct Pro platform steps up to Level II quotes and additional charting functions, as well as the Market Matrix, which allows you to search the market for stocks to trade based on parameters you set. Although its routing algorithms give you terrific executions on stock transactions, the platforms don't allow you to trade multileg options orders online.
ChoiceTrade ( www.choicetrade.com) also gives its customers the option to use the powerful BonTrade software platform, or a browser-based offering called ChoiceTrader Online. The browser version includes ChoiceStreamer, a relatively easy-to-use configurable interface. The ChoiceTrader Select platform, which links into an eSignal subscription with powerful charting and technical analysis capabilities, gives customers access to Credit Suisse's algorithmic trading capabilities. Through the Select platform, customers can route orders to a new electronic communications network called BATS, ( Better Alternative Trading System).
A recently launched feature of the Select/BonTrade platform is the TradeScript Manager, an extremely flexible basket generator. A trader could have a long list of ideas queued up that are stored in the TradeScript window. Each order could be different: Some could be buys, some short sells, and some long sells to get out of previous positions. The TradeScript window will give the trader real-time data on each potential trade. You can launch orders simultaneously, or pick a few from the group and hit the Launch Selected button. It's an intriguing feature for frequent traders, especially those who want to send a group of orders all at once.
Visit Barron's at www.barrons.com for the latest financial analysis and commentary, updated daily.
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