DIRECT MARKET ACCESS
Ebrokerages may have revolutionized the way the average investor buys stocks, but daytraders can't afford the snail's pace at which buy/sell orders travel via email from trader to brokerage to market maker and back, leaving execution unconfirmed while prices fluctuate. What's more, they don't like the notion that the brokerage might take a fee from the market maker, a practice known as payment for order flow. If the brokerage gets a kickback, what incentive does it have to seek out the market maker offering the best price for a given security?
If it isn't good for daytraders, it isn't good for you either, according to TradeCast and CyBerCorp (a division of Charles Schwab), two daytrading firms offering free downmarket versions of their professional trading apps for Windows. Their advantage is direct access: a connection directly from their servers to the ECNs, where trading is as simple and immediate as exchanging numbers.
Where TradeCast's pro software, Elite, presents a jumble of windows, the free Revolution delivers the bare essentials. "If Elite is a Ferrari," says CEO Jim Howell, "Revolution is a Ferrari with a Chevrolet body." Fixed-position windows display Level I quotes (current best bid and offer), holdings (including transactions and portfolio management), charts, and news from S&P MarketScope. A Safety Net feature re-establishes contact with the server if the connection is broken. TradeCast requires $1,000 to open an account and $14.95 per trade; Level II quotes cost $60 a month.
CyBerCorp's CyBerX lacks the safety net, but it automatically executes orders at the best available price and sells shares when their value reaches a predetermined limit. The screen offers Level I quotes, transactions (with big, bold Buy and Sell buttons), confirmation, and portfolio management. CyBerCorp requires a $10,000 initial investment and charges $14.95 per trade.
To CyBerCorp chair Philip Berber, these tools are only one step away from an electronic securities operating system, or E-SOS, that will connect directly to a global market for all kinds of securities. "Most people think it's going to take years," he says. "But I believe we'll be able to do most of it within 18 months."
- J. Schulz (jschulz@hyperformer.net)
TradeCast: www.tradecast.com.
CyBerCorp: www.cybercorp.com.
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