Computer mice nibble at Wall Street elite
Online accounts and 24-hour trading put average investor in driver's
There was a time when Wall Street was a club, a place where family connections helped make people rich.Skip to next paragraph
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Now the club has just about disappeared, toppled by a mouse - a computer mouse. Thanks to technology, Wall Street is undergoing one of the biggest changes since the days of ticker tape.
Call it the "democratization" of investing.
Trading, which started in 1792 under a buttonwood tree on the corner of Broad and Wall, is moving onto the Internet - a shift underscored this week when Merrill Lynch & Co. announced a low-cost online service for its customers.
That, coupled with a move toward round-the-clock trading, will likely involve the ordinary American even more in the market - changing the culture of Wall Street in unknown ways.
Now online companies offer ordinary investors the possibility of getting in on the ground floor. And the markets are moving toward longer hours, giving average investors the same trading opportunities as wealthy investors.
"We're seeing a revolution in retail investing," says Shawn Johnson, director of research at State Street Global Investors in Boston.
Already, one-third of all retail stock trades are done online, estimates Gomez Advisors Inc. in Concord, Mass., an independent authority on the Internet delivery of services.
Part of the draw is the big savings. To trade 100 shares of IBM could cost an investor $150 in commissions at a full-service brokerage house. On the Internet, it can be as low as $7.
"Any money you don't spend on commissions means a bigger chunk going towards investments," says Barb Roper, director of investor protection at the Consumer Federation of America.
The low cost is one of the main reasons Michael Walsh, a commercial banker from Westchester County in New York, is opening an account at San Francisco-based Charles Schwab & Co.'s midtown New York branch.
Goodbye to brokers
"I think I get enough information on my own," he says, complaining that his former broker at Merrill Lynch never called him and said, "I have a good idea" of a stock to buy.
At Schwab, a steady stream of customers - mostly office workers on their lunch break - stop in to use computer terminals to get quotes or make trades. One of those is Marvin Usatine, an electrician from New Jersey, who uses the Internet to trade stocks once or twice a week.
Although he still has an account at a full-service broker, he mainly talks to his broker when the market is volatile. "When stuff is happening in the market, he soothes me," he says.
For the most part individuals who use the Internet are self-directed. Gomez estimates there are now some 7.5 million online accounts. By the end of the year, it predicts there will be 10.5 million. Many of these new accounts are from young people who have never entered a brokerage house but are comfortable using the Internet.
Many individuals are going online by way of their self-directed retirement plans. Almost half of investors 401(k) accounts at Fidelity Investments use the Internet in managing their accounts.
"The combination of ease and reduced costs has opened up trading to a whole new slew of investors," says Mr. Johnson of State Street. "How many 22-year-olds have a brokerage account? Now, they have no problem doing this."
At InteractiveBrokers.com, the mix of investors goes from doctors and lawyers to ordinary workers. At the firm, one of the appeals of online trading is access to the markets. "No one has faster access than the next guy," says David Downey, an executive at the Timber Hill Group, LLC, the parent of Interactive.