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					                 %    The dow jones business and Financial weekly




                       In Barron’s 16th annual online-broker review, social networks and
                                                                                                          www.barrons.com         MaRch 14, 2011




                       iPads are in; commission cuts are out. And we crown a new champ.



Making the Right Connection
By Theresa W. Carey
                                                                    (The following has been excerpted.)


    After swerving between shocking                  $1 million and trade on average 42 times                         early 2011, we saw the launch of thinkor-
growth as a toddler and a serious mood               a year; they also have several brokerage                         swim 2.0 for TD Ameritrade, Fidelity’s
disorder as an adolescent, online trading            accounts. We’ve tried to keep that audi-                         browser-based streaming tool, Schwab’s
is on the verge of a stable maturity. Today          ence in mind in providing information.                           new StreetSmart Edge and Choice-
it appeals both to hyperactive traders and               Even as they mature, online brokerages                       Trade’s ChoiceStreamer that incorporate
long-term coupon clippers, to stock and              continue to change the investment experi-                        these enhancements. In order to attract
bondholders and foreign-exchange spe-                ence. Where the customer of a traditional                        and retain high-net-worth active-trading
cialists, as well as to those willing to pay         broker once picked up the phone to get                           clients, most online brokers now offer a
up for the latest gadgetry and those just            advice, increasingly, online brokers set up                      choice of several platforms. This platform
trying to save a few bucks in commissions.           investor communities, so their clients can                       proliferation makes evaluating brokers
Its ranks include asset-management gi-               all talk among themselves. Schwab and                            trickier than in the early years of our sur-
ants like Fidelity and tightly focused spe-          E*Trade in the last year have joined the                         vey, but our review process takes into ac-
cialists with names like TradeMonster.               list of brokers with community services,                         count their full package of tools, with an
    It’s a big change since 1996, when Bar-          while others have expanded existing so-                          eye to how they work together.
ron’s first reviewed online brokers. The             cial networks.
top-rated firm that year was Lombard On-                 And the technology just keeps mov-                           The latest rage in online brokerage is
line Brokerage, which morphed into Dis-              ing forward. In the last year we saw the                         mobile trading, where new apps seem
cover Brokerage a couple of years later              launch of numerous in-browser trading                            to spring up weekly. Many offer stream-
before being purchased by Harris Bank.               applications, which bridge the big gap                           ing data and the ability to trade complex
We were impressed with Lombard’s real-               between bare-bones Web-based offerings                           options. McGovern sees a lot of interest
time quotes and account updates, a rarity            and software-based trading programs                              among brokers in applications that can
at the time. Where are they now? Har-                that abound in bells and whistles and are                        run on Androids and iPhones. “The iPad
risDirect, Lombard’s descendent, closed              downloaded onto a computer.                                      also is an area of interest, but we’re not
down and was snapped up by E*Trade.                      “Brokers realized that the installed                         seeing a lot of development yet,” McGov-
    For our 16th survey we thought we’d              software has more firepower than the av-                         ern says. During the review process, we
try to do something a little different to            erage active investor needs. So they said,                       saw several late-stage iPad applications
reflect a more diverse marketplace of bro-           ‘Why don’t we take these tools, streamline                       that are not yet ready for market. We
kers and investors. We focused more on               them, put them in a browser, make them                           expect several big-name brokers to take
helping our readers figure out whether a             more visually appealing, and we’ll get                           advantage of the additional real estate on
brokerage is the right home for part — or            more trades,’ “ notes James McGovern,                            that device over the next few months.
all — of their portfolio. (Don’t worry, you          senior analyst at research firm Corpo-                               The recent bull market has come at a
can still find our favorites on the follow-          rate Insight (www.corporateinsight.com),                         cost for online customers. Don’t look for
ing pages.) From what we know, Barron’s              which analyzes the financial industry.                           more big price cuts this year. After a sig-
readers tend to have a portfolio topping                 During the second half of 2010 and                           nificant price war during late 2009 and


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                                                                          !
Something for Everyone…                                                                                                                                 as platform or maintenance fees, margin
                                                                                                                                                        debt, and charges for transferring an ac-
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�� �� ������� ������� �������� �� ������ ���� ��� ��������� ���������� ������������ ��� �������� ��������
                                                                                                                                                        methodology and scoring appears at Bar-
�� ���������� ��� ������� ��� ����������� ������� ��� ������������� ��������
                                                                                                                                                        rons.com, where you’ll also find reviews of
BEST FOR LONG-TERM INVESTING                              Stars                BEST FOR OPTIONS TRADERS                                 Stars           all two dozen firms as well as a compre-
Fidelity                                                  HHHH�                TD Ameritrade (thinkorswim)                              HHHH�           hensive, feature-by-feature guide to each.
TD Ameritrade                                             HHHH�                tradeMonster                                             HHHH�               Though we award 4µ stars (out of a
Schwab                                                    HHHH                 OptionsHouse                                             HHHH�           possible five) to four brokers this year,
E*Trade (IRAs)                                            HHHH                 optionsXpress                                            HHHH            we also take note of the diversity in in-
TradeKing                                                 HHHH                 TradeKing                                                HHHH            vestor priorities. As a result, we list the
                                                                                                                                                        top brokers in four categories — long-
BEST FOR FREQUENT TRADERS                                 Stars                BEST FOR INTERNATIONAL TRADERS                           Stars
                                                                                                                                                        term investing, options trading, interna-
TradeStation                                              HHHH�                Interactive Brokers                                      HHHH�           tional investing and high-frequency trad-
MB Trading                                                HHHH�                ChoiceTrade                                              HHHH            ing — to help readers decide where they
Interactive Brokers                                       HHHH�                TradeStation                                             HHHH            should open (or transfer) an account. We
Lightspeed Trading                                        HHHH�                optionsXpress (futures)                                  HHHH            also show the brokers who were at the
TD Ameritrade (thinkorswim)                               HHHH                 MB Trading (forex)                                       HHHH            extremes when we calculated the monthly
                                                                                                                                                        cost of trading for infrequent traders as
                                                                                                                                                        well as for those who trade multiple times
Including the Price-Conscious Shopper
                                                                                                                                                        per day.
������� ������ ��� ������ ����� ���������� �� ��� ������ � ������ ��� �������� ��� ������ ������ �� ���                                                     We knew going into this ranking that
���� ��������� �� �������� �� ������ ��� �� ���������� ��� ������ �� ������ ������                                                                      we’d have a new winner. The firm that
                                                                                                                                                        won three years running, thinkorswim,
Occasional Trader’s Monthly Costs*                                             Frequent Trader’s Monthly Costs**                                        has been absorbed into its parent, TD
LOWEST                                                                         LOWEST                                                                   Ameritrade, which bought it in 2009. So
eOption                                                     ������             eOption                                                          ����    it’s time to crown a new champion.
Interactive Brokers                                           �����            Interactive Brokers                                                ���
Just2Trade                                                    �����            Just2Trade                                                       �����      TradeStation (www.tradestation.com)
HIGHEST                                                                        HIGHEST                                                                  is our top pick for 2011, earning 4µ stars
AB Watley                                                  �������             AB Watley                                                      ������    and just squeaking by a couple of contend-
TD Ameritrade                                                 �����            TD Ameritrade                                                    �����   ers. But let’s put this out there right away
E*Trade                                                       �����            Scottrade                                                        �����
                                                                                                                                                        — this isn’t a broker for the casual trader.
Average ��� ������                                            60.13            Average ��� ������                                             2,023
                                                                                                                                                        For starters, you’ll pay a $99 per month
����������� ������� � ����� ������ ��� � ������� ����� ��� ������ ���������� ������� ��� ����� ������� ��� ������� ������ ���� ������� ������ �����
                                                                                                                                                        platform fee if you trade fewer than the
                                                                                  ������� �������� ������ ������ ������� ���� ��������� ����� �� ����   equivalent of 5,000 shares of stock or 50
                                                                                                                                                        options contracts in that time. You can,
                                                                                                                                                        however, trade just about everything in
early 2010, many brokers seem to have                                         tem didn’t offer a volume discount.
                                                                                                                                                        this powerful, downloadable software plat-
put the financial crisis behind them and                                         Though the roster of online brokers
                                                                                                                                                        form. The program gives you the ability
are willing to hold the line for now. Most                                    already is more diversified than ever, we
                                                                                                                                                        to create your own trading system based
have eliminated pricing tiers, a move we                                      have four new names in the survey this
                                                                                                                                                        on a variety of technical and fundamental
favor, though a few continue to offer a                                       year. TradingBlock (tradingblock.com),
                                                                                                                                                        data, and then test it using several de-
range of prices depending on either ac-                                       which was launched last fall, eOption                                     cades’ worth of clean data.
count size, number of trades, platform                                        (eoption.com), SpeedTrader (SpeedTrad-                                       CEO Salomon Sredni says his broker-
selected, or per-share or per-trade pric-                                     er.com) and Merrill Edge (merrilledge.                                    age competes for hyperactive day traders
ing. Merrill Edge has four tiers, while                                       com) Another, which we profiled in last                                   who require low commissions, advanced
E*Trade and Fidelity have two. AB Wat-                                        week’s Electronic Investor column, is GX                                  analysis, superior speed, high-quality data
ley and ChoiceTrade charge different fees                                     Trader, which opened its virtual doors in                                 and execution, and automated trading.
for their Websites than one of their soft-                                    mid-February.                                                             TradeStation also vies for serious active
ware platforms.                                                                                                                                         traders and investors who need a wide
   There’s been more signs of price                                           This year, we took at look at 24 on-                                      variety of trading, scanning, and testing
stability in just the last month as only                                      line brokers, paying special attention to                                 tools. “Both types of traders can and do
minor changes have occurred. Zecco has                                        what they have to offer for wealthy, active                               use TradeStation to elevate their trad-
eliminated its 10 free trades per month,                                      traders like a Barron’s reader. We evalu-                                 ing,” says Sredni.
and notched its base commission up to                                         ated these firms across eight categories,                                    TradeStation 9.0 was launched in late
$4.95 from $4.50. TradeKing meanwhile                                         evaluating what can be traded online, how                                 2010. It includes an update of EasyLan-
changed its options pricing schedule so                                       the tools work together across platforms,                                 guage, which is the simplified coding lan-
that a transaction of eight or fewer con-                                     their educational offerings and customer                                  guage used to create and test your trading
tracts is $4.95 plus 65 cents per contract,                                   service, and the nuts and bolts of placing                                strategies. If you don’t want to write your
while nine or more is $8.95 plus 15 cents                                     and executing a trade, among other items.                                 own, you can search the Strategy Network,
per contract. Big traders will save a lot                                     When examining costs, we considered                                       a marketplace for trading and analysis
under the new structure since the old sys-                                    stock and options commissions as well                                     tools designed to work with TradeStation.
The firm enhanced its trader- education                                        This is a broker for the advanced ac-                                      keep our clients informed and fully aware
programs, including numerous online We-                                     tive trader.                                                                  of how these new offerings benefit them,
binars and in-person events.                                                                                                                              and how they can take full advantage of
   For international traders, TradeStation                                  So where does online brokerage go now                                         them.”
released Eurex execution. Two technol-                                      that it’s entering maturity?                                                     The stock market reminded investors
ogy acquisitions, the Grail System and                                         New mobile applications will allow it to                                   again last week that risk management
Portfolio Maestro, further enhance the                                      go just about anywhere. And expect the
                                                                                                                                                          is crucial. New tools that help investors
software’s strategy building and back-                                      launch of more and more powerful stream-
                                                                                                                                                          choose an exit strategy to protect profits
testing functions. The cost of trading                                      ing tools to keep you on top of market
                                                                                                                                                          and minimize losses are important, too.
here is in the bottom third of the firms                                    movements and give you real-time stock-
we evaluated, but that applies only if you                                  and option-screening capabilities. Video                                      “On average, customers are using slight-
trade frequently enough to avoid the plat-                                  seminars will continue to sprout, and the                                     ly less margin and are becoming savvier
form fees. You can choose from per-share                                    virtual bookshelves of online-investing li-                                   about stops and option protection,” notes
or per-trade pricing; the latter is more                                    braries will expand. Don Montanaro, CEO                                       David Lipsett, president of MB Trading.
cost-effective if you typically trade larger                                of TradeKing, says, “As with any cycle                                           Middle age is usually a more cautious
blocks.                                                                     of innovation, it will be critical that we                                    time of life, but it doesn’t have to be dull.


A Photo Finish
��� ����� ������� ����� �� �������� ���� ������� ���� ��������� �� ���� ���� �� � ������ ����� ��� ������������ ������ ������ ���� ��� ��� ��� ����� ������
������������ �������� �� ������� ����������� ��������� ��� �������� ������� ��� ���������� �� ��� ��� ������ ���� ����������� ������� ���� ����� �����


                                                                                                                                           Portfolio
                                                                                                                                           Analysis          Customer
                                      Trade                Trading                                 Range of           Research               and            Service and
Broker                              Experience           Technology            Usability           Offerings          Amenities            Reports           Education             Costs             Total        Stars
TradeStation                              ���                  ���                  ���                 ���                ���                  ���                ���               ���             ����         HHHH½
MB Trading                                ���                  ���                  ���                 ���                ���                  ���                ���               ���             ����         HHHH½
Interactive Brokers                       ���                  ���                  ���                 ���                ���                  ���                ���               ���             ����         HHHH½
TD Ameritrade                             ���                  ���                  ���                 ���                ���                  ���                ���               ���             ����         HHHH½
OptionsHouse                              ���                  ���                  ���                 ���                ���                  ���                ���               ���             ����         HHHH
tradeMonster                              ���                  ���                  ���                 ���                ���                  ���                ���               ���             ����         HHHH
optionsXpress                             ���                  ���                  ���                 ���                ���                  ���                ���               ���             ����         HHHH
TradeKing                                 ���                  ���                  ���                 ���                ���                  ���                ���               ���             ����         HHHH
Fidelity                                  ���                  ���                  ���                 ���                ���                  ���                ���               ���             ����         HHHH
Lightspeed Trading                        ���                  ���                  ���                 ���                ���                  ���                ���               ���             ����         HHHH
ChoiceTrade                               ���                  ���                  ���                 ���                ���                  ���                ���               ���             ����         HHHH
Charles Schwab                            ���                  ���                  ���                 ���                ���                  ���                ���               ���             ����         HHH½
E*Trade                                   ���                  ���                  ���                 ���                ���                  ���                ���               ���             ����         HHH½
Scottrade                                 ���                  ���                  ���                 ���                ���                  ���                ���               ���             ����         HHH½
eOption                                   ���                  ���                  ���                 ���                ���                  ���                ���               ���             ����         HHH½
Cobra Trading                             ���                  ���                  ���                 ���                ���                  ���                ���               ���             ����         HHH
SogoTrade                                 ���                  ���                  ���                 ���                ���                  ���                ���               ���             ����         HHH
Zecco                                     ���                  ���                  ���                 ���                ���                  ���                ���               ���             ����         HHH
Just2Trade                                ���                  ���                  ���                 ���                ���                  ���                ���               ���             ����         HHH
SpeedTrader                               ���                  ���                  ���                 ���                ���                  ���                ���               ���             ����         HHH
Merrill Edge                              ���                  ���                  ���                 ���                ���                  ���                ���               ���             ����         HHH
Firstrade                                 ���                  ���                  ���                 ���                ���                  ���                ���               ���             ����         HH½
TradingBlock                              ���                  ���                  ���                 ���                ���                  ���                ���               ���             ����         HH½
AB Watley                                 ���                  ���                  ���                 ���                ���                  ���                ���               ���             ����         HH½
��� ���� ��������� ���� ��� ����� ����� �� �� ������� ���� �������� �� ������� ����� ����������� ����� �� � ����� �� ��� ������� ������� ����������� ����� �� � ����� �� �� ����������
                                                                                                                                                              ������� �������� ������ ������ ������� ���� ��������� ����� �� ����
We Ranked Our 24 Brokers Using the Following Measures
   Trade Experience: Working with a live       neously and are less inclined to execute      quality of third-party research and its in-
account, we looked for a real-time quote       orders via routes that offer payment for      tegration with the rest of the site; and the
and executed equity trades during mar-         order flow. Brokers offering price im-        availability of screeners, with special em-
ket hours, making market buys and limit        provement—a sale above the bid price, a       phasis on options-strategy screeners. Bro-
sales of a stock or exchange-traded fund.      buy below the offer—received a fraction       kers also won points for offering real-time
A real-time quote that is displayed without    of a point depending on the portion of        streaming quotes at no additional cost,
any additional user input (such as typing      their transactions that benefited.            powerful charting capabilities, and Level
the symbol into a separate box or hitting                                                    II quotes. Partial credit was awarded for
a “Quote” button) receives credit here; if        Top marks were earned by brokers           features that generated an extra fee.
the trader has to make a duplicate entry       who offered a wide array of order types,
of the ticker symbol to get a quote, the       including conditional orders, and had            Portfolio Analysis and Reports: The
broker got zero. We looked for a real-time     spray order routing technology. The abil-     emphasis here is on clearly laid-out re-
streaming quote that updates automati-         ity to place a trade from a graph earned a    ports, updated in real time, showing cur-
cally. We checked out the ways a trader        fraction of a point. In addition, we looked   rent balances, positions and margin sta-
is told that an order is executed, such as     for ways to customize the trading experi-     tus. Portfolio-analysis reports, with links
pop-up notices or an order status screen       ence, such as setting a default number of     to news and research, as well as extensive
that is updated when the order fills.          shares or contracts, to speed order entry.    transaction history, are most desirable.
                                                                                             Tax reporting also falls in this category.
   Following the market buy, we tracked           Usability: A 5 here means the site         Full credit is given for reports that can
the execution and portfolio reports. We        or program was easy to use and well-          be created on the broker’s Website, with
looked for pre-filled order tickets when       designed, didn’t bog down when moving         no additional fees or data entry required.
selling a position, which eliminates pos-      from screen to screen, and can be tailored    Partial credit is awarded to brokers that
sible errors during the closing process.       to the user’s needs. We looked at how         populate services such as GainsKeeper
After entering a limit-sale order, we exam-    easy it is to get started on the platform     and Maxit (tax analysis and reporting
ined the open-order reports and looked at      or Website as a new customer. Constant        programs) for an additional fee.
ways to check the progress of the order,       availability of a trading ticket, and easy
as well as ways to adjust the limit price or   access to research and account status            Customer Service and Education: We
cancel the order. A key component going        data are key. Being able to easily switch     sized up online help such as live-chat ca-
forward is the ability to select a tax lot     from one area of the Website or program       pability, user guides and frequently-asked-
when closing a position.                       to another is crucial here, as are customi-   question files. Offline help was assessed
                                               zation options.                               by making calls to customer service, and
   We placed options orders, using op-                                                       weighing the brokers’ reports of the aver-
tions’ order-entry screens when available.        Range of Offerings: We awarded points      age time spent on hold when a customer
We also examined mutual-fund, bond, and        for the diversity of investments that can     calls in. We took a look at the education
(when available) futures, commodities and      be traded online, with partial points given   offerings, both online and live. The ability
foreign-exchange order-entry screens.          for those that can only be traded offline.    to visit a broker in person, and to access
Methods for placing conditional orders,        Since all the brokers allow long and short    the account via a mobile device, is taken
such as one-cancels-another or one-trig-       stock-trading, as well as single-leg op-      into account here.
gers-another, were checked out.                tions orders online, we don’t award points
                                               for those transactions. We asked brokers         Costs: We looked at commissions for
   An overall score of 5 in Trade Experi-      how many stocks, on average, their cus-       stock and options trades and margin in-
ence means the order entry-and-execution       tomers can sell short, and awarded up to      terest rates, giving more points for lower
process flowed easily from one step to the     a half-point based on their answer. Com-      costs. We scaled the points awarded so
next, with streaming real-time informa-        plex options trading, and the availability    that the lowest costs in the group earned
tion (including buying power and margin        of mutual funds, bonds, futures, commodi-     the maximum number of points, with frac-
balance) available when needed.                ties and international trading were also      tions (and occasional zeros) given to the
                                               considered. A 5 in this category means        more expensive brokers. Stock and op-
   Trading Technology: The availability of     you can execute all of these transactions     tions commissions are the biggest factor
price-improvement strategies and smart-        online.                                       here, but mutual-fund and other transac-
order routing technology (which finds the                                                    tion fees are also considered. A 5 could
best bid or offer) is necessary to earn a         Research Amenities: This category          be earned here by very low stock and
5 in this category. This year we asked         measures the quality and accessibility of     mutual-fund commissions, $4 or less for 10
whether a broker’s order routing engine        research, quotes and charting. We looked      options contracts, margin interest rates
used a spray or sequential engine; spray       for research, news and charting linked to     below 2%, and no account-maintenance
routing contacts multiple venues simulta-      a customer’s portfolio and watch lists; the   fees.

				
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