Dashboard trading straight to market
Etrade offers investors direct access to buy and sell online with no third party execution, writes Anna Healy Fenton
Buying stocks and shares can be a hairy enough experience at the best of times. Not for the faint-hearted, it actually requires a leap of faith to put your money into something that can just as easily fall as rise. Nowadays the idea of ringing your broker to instruct him to make a trade for you is not entirely history, but many investors choose instead to buy and sell online.
So what are the guidelines for choosing an online trading platform? Internet-based reviewer TopTenREVIEWS stresses the importance of being well informed. "With a good online stock trading service, you can learn everything to become a smart investor, and buy and sell stocks online."
Utilising an online stock-trading service, you can buy and sell stocks, options, mutual funds, exchange-traded funds and various fixed-income securities including bonds. Most online stock trading services, the reviewer adds, also offer useful tools such as alerts, watch lists, third-party analyst reports, option chains, investment calculators and virtual trading. The best services offer free webinars, newsletters, blogs, seminars, forums, glossaries, definitions and more.
"Online stock-trading services should provide you with all the resources you need to make well- informed financial choices and the ability to buy and sell stocks from anywhere, including from your cellphone," the reviewer adds. Support resources can include educational materials such as articles, real-time charts, streaming news, investment calculators and a user-friendly trading platform.
It points out that fees and commissions can quickly escalate, with most services charging fees for trades, broker assisted trades, option trades and so on. Generally, customers can expect all online stock trading services to offer the ability to buy and sell stocks, options, mutual funds and exchange-traded funds. The online review concludes: "Because buying and selling stocks online can be a bit nerve racking, the best services provide excellent support by telephone, e-mail, instant messaging and chat."
Etrade is an example of an online platform that Hong Kong investors can use to trade on US markets. Set up in 1999, it describes itself as a technology-driven platform.
It offers news and research reports, charts, technical analysis, market news and research for the customers to make sure they are well informed of the market situation and for them to make insightful decisions, says Helen Chan, Etrade Financial's vice-president for Asia-Pacific, which has offices in Hong Kong and Singapore.
So how does it work? "It's self-directed: Customers do their own market executions, you go on to website, log in with user names and passwords. There is a trading tab where customers can place the trade," she explains.
Within the trading site there is information for the customers to do their own research before they make any investment decisions.
As to how quickly a trade can be made, Chan can't say, "but we do direct market access straight through, with no third party execution. The order goes straight through to the market."
Commission and fees are something to watch with online platforms as they may rise sharply according to the volume and size of trades. Etrade has two tiers of fees: a flat fee per trade, regardless of size of trade, with the lower rate US$9.99 per trade and the charge for the higher-tier US$19.99, based on volume and assets.
Customers are also given broker-assisted trades if required, plus a mobile platform is now offered, where trades can be done via smartphones such as iPhone, iPad, BlackBerry and Android-powered devices. It looks complicated, but Chan insists it's user-friendly, with all the different information on one screen, including the latest market news and stock quotes.
Etrade's 360 is a platform for individual investors. It looks like a car dashboard, displaying charts, information and also your own account details. This is customised to your own needs. It looks like the BBC homepage, Chan says, where you can personalise different topics and categories on one page. "It's a similar concept, no flicking from page to page, everything on one page," she says, but it looks like an awful lot to squeeze in.
For more sophisticated active traders, they offer Etrade Pro; again, all on one page but with more advanced tools, such as CNBC streamed live and other goodies.
With a bit of prodding, Chan admits Etrade is not unique in offering this kind of service. "Other banks and brokerages offer trading through online, but some are not directly linked into the market."
In fact, its direct competitors in Hong Kong include Charles Schwab and HSBC, which also offers US trading through its online platform.
Does Etrade offer credit to customers? "Our customers are allowed to trade stock, exchange-traded funds and options and they offer margin financing, depending on customers' holding positions in terms of different stocks."
Chan dismisses the idea that the typical Etrade client is an obsessive day trader glued to a smartphone. "I would say they are self-directed, very comfortable making their own decisions and online savvy, happily browsing and searching for information online."
So how does it work? First of all customers face a huge paperwork hurdle before they can trade. They submit account applications and go through a screening process.
After the account is opened, the customers are free at any time to fund the account, she says, which local clients can do through the four major banks in Hong Kong. They also have the choice of direct transfer from those banks to their Etrade brokerage account.
But first there's the tedious amount of forms to fill in. They are obliged to meet the "know your customer" requirements, which means screening applicants to make sure they are legitimate. With the rules against money-laundering, a lot of supporting documents are needed.
Etrade also asks customers for their trading experience in the market and trading objectives. "We have to know our client and where they and their money are coming from," Chan says.
So what's the typical profile of an Etrade online trader?
"They are the canny investors who nowadays are seeking to diversify their portfolio beyond products, into geographical locations and it is getting more and more sophisticated as they get more educated," Chan says.
"Now they see beyond their local markets, so they are able to capture different opportunities at different points of time."
Clients don't need to be Hong Kong-based but potential electronic traders and shakers must at least be persistent enough to fulfil the onerous account-opening requirements.