Broker Competition Paying Dividends for Active Traders

Online brokers that cater to active traders continue to search for a business model that'll win customers. Thanks to their efforts, traders can now get everything from free software to free computers and free access to private networks, not to mention low-cost trades. With so many competing service plans out there, deciding on a broker is about as tough as choosing a cellular provider.

In fact, the analogy between brokers and cellular providers is a pretty good one, come to think of it. When you sign up with a cellular provider and start giving out your number to people, you're likely to stay with that provider no matter what. Same goes for online brokers. Once you open an account and get to know how the trading software operates, chances are you'll stay put. Brokers and cellular providers know this, of course. So they'll dangle some pretty tempting offers in order to get you to switch, starting with low fees.

Last week, for example two of the largest brokers serving active traders CyBerCorp.com and Tradecast announced price cuts. CyBerCorp.com reduced its execution fees from $19.75 to $17.95 if you make as little as one trade per month. Make 500 trades per month and the fee goes down to $9.95. OK, that doesn't sound like such a big deal. But last February, before the company was acquired by Charles Schwab (SCH Quote), it was charging roughly $30 per trade. Last week's fee reduction applies to CyBerCorp.com's high-end trading platform, CyBerTrader, which I wrote about in a previous column.

The Leasing Model

CyBerCorp.com doesn't charge monthly rental fees for its CyBerTrader software. But many of its competitors still do, including Tradecast. A day after CyBerCorp.com announced its price cuts, Tradecast cut its monthly rental fees for its high-end Elite execution platform from $180 to $99. (That fee is waived if you maintain a minimum of $10,000 in your trading account.) Tradecast charges $20 per trade, and like CyBerCorp.com, the company offers quantity discounts. ...