US Discount Online Brokerage Update 2005

June 6, 2005


New York, NY, USA June 6, 2005

According to Celent the online brokerage industry is only operating at 35% of trading capacity -- at best. While retail trading has recovered somewhat from the crash of 2000, Celent believes it is still 21% below the 2000 peak.

E*TRADE痴 bid for Ameritrade and the potential TD Waterhouse acquisition is only the first volley, as the pressure for online brokers to consolidate increases. In a new report, , Celent provides an overview and analysis of key market trends, identifying leading industry players and discussing their prospects for future growth. It further looks at the trends which are creating pressure for industry consolidation in the discount online brokerage industry. The report also profiles several online retail brokerage firms and their product and service offerings.

As the discount online brokerage industry continues to recover from the dot-com crash of 2000, firms are getting used to the fact that retail trading levels may never return to the levels seen in 2000, and commissions are on a slow but sure decline. However, the leading online brokerages have had reasonable success in their efforts to develop new sources of revenue as the business continues to evolve.

"While the discount online brokerage industry will face extreme competition over the short run, it is not an industry that is going away, as people will always need brokerage services" says Lauren Bender, analyst in Celent痴 Securities and Investments group and author of the report. "While it is clear that trading services -- the traditional bread-and-butter of the brokerage business -- is fast becoming a commodity, clients will gladly reward those firms that are able to help them successfully manage (and grow) their net worth." "There will be room for one or two players to focus profitably on providing efficient trading services, but for the most part the firms that will be successful five years out will be those who are able to create value-added financial management products and services."

In spite of current and future price cuts, sluggish growth and costly infrastructures, the discount online brokerage firms, in general, are well positioned to remain important providers of financial services to a growing number of Americans, as services traditionally provided by banks and investment advisors are increasingly provided by brokerage firms. The discount online brokers can expect to be a major beneficiary as this convergence in the retail financial services sector continues.

The firms examined in the report are Ameritrade, Charles Schwab, E*TRADE, Fidelity, Scottrade and TD Waterhouse.

The 49-page report contains 28 figures. A table of contents is available online.

of Celent's Retail Securities & Investments research service can download the report electronically by clicking on the icon to the left.  Non-members should contact for more information.


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Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

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Table of Contents


New York, NY, USA June 6, 2005

US Discount Online  Brokerage Update 2005

Return to report Abstract

Executive Summary 3
Market Overview 4
  Retail Investors Are Trading Less 4
  Retail Investors Lose Interest in Individual Equities 6
  New Clients Are Still Coming 10
Growing Up Is Hard To Do 12
  A Mature Industry 12
  The Case of Charles Schwab 17
  And The Winner Is 18
  Brokerage Firms Meet The Challenge 18
Market Trends 21
  New Lines of Business 24
  Focus On Cost Reduction 24
  Integration 25
  Consolidation 26
  Retail Market Trends 27
  Competition Is All Around 28
The Brokerage Firms 29
  Market Share 34
  Platform Comparisons 37
The Long Road Ahead 40
  Invest To Stay Competitive 40
  To The Creative Go The Spoils 41
Conclusion 46
Objectivity & Methodology 47

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