Rivals’ Ranks Grow in Online-Trading Field
The crowded world of electronic stock trading got more so Wednesday, as Morgan Stanley Dean Witter said it will let customers trade over the Internet, Charles Schwab launched its after-hours service and REDIBook ECN signed three more brokerage firms as investors.
Morgan Stanley, the second-largest U.S. securities firm, said customers now can trade stocks and bonds online for as little as $29.95. For a single fee based on asset size, they get unlimited online trades.
Morgan Stanley’s discount unit, Discover Brokerage, will be renamed Morgan Stanley Dean Witter Online.
Morgan Stanley and other full-service firms once eschewed online trading, where commissions are a fraction of those charged to customers who rely on full-service stock brokers. But Merrill Lynch & Co., feeling pressure from discounters such as Schwab, said in July that it would offer Internet trading starting Dec. 1.
Paine Webber, Prudential Securities and Salomon Smith Barney already or are expected to soon offer online-trading options.
As for Schwab, the No. 1 online broker began letting customers trade from 1:30 to 4 p.m. PST weekdays through REDIBook, a fast-growing electronic communications network that matches buyers and sellers.
Coincidentally, Schwab suffered a glitch that prevented customers from trading on its Web site for 2 1/2 hours Wednesday morning. Schwab said the problem was unrelated to the roll-out of extended trading.
Schwab wouldn’t reveal how many orders customers placed during its first late session, but said it was able to execute about 30% of those orders. (Execution depends on finding another investor willing to take a trade.)
REDIBook, which counts Schwab as an investor, Wednesday said it also signed Credit Suisse First Boston, Lehman Bros. and National Discount Brokers Group as investors. Fidelity Investments also is a partner.
REDIBook is tied for third in ECN market share, but with only about 8% of total ECN volume, according to Putnam, Lovell de Guardiola & Thornton.
However, with its new partners, REDIBook has “clearly emerged as one of the leading ECNs,” alongside Instinet, Island and Archipelago, said Russell Keene, a Putnam analyst.
Having brokerages as investors is important for ECNs because it gives the brokerages incentive to send orders to the systems.
“What’s most critical for us is attracting critical mass” in terms of orders, said Larry Leibowitz, REDIBook acting chief executive.
