Online Brokers’ Definitions of Active Traders Vary
Asking each online brokerage firm how they define the active trader is like asking someone how the universe was created. Everyone comes up with a different answer.
"Average retail investors trade one or two times a month, versus active traders who just blow that out of the water," says Adam Honore, at Aite Group. In fact, active traders may trade as little as three times a month at San Francisco-based Charles Schwab, the nation's largest discount broker. "Our real sweet spot are those who are trading 36 times, or up to 500 or 1,000 times a year. Beyond that, you're getting into hyperactive day trader markets, says Rich Levine, VP of Charles Schwab Active Trading Services.
Last year, Schwab shut down its CyberTrader broker-dealer unit that had its own separate trading platform focused on the hyperactive trader and brought the technology and developers in-house to apply those resources to the Schwab trading tools and platforms ((Street Smart Pro on the high-end and Schwab.com for Web-based trading). "All the funding and spending is not going to two targets, but one target," says Levine. "We believe as a result we are providing a more robust toolset that meets the needs of those clients," says Levine.
In E*Trade's case, the broker defines the active trader "as someone who averages 10 trades or more a month, which is regardless of balance," says Christopher Larkin, E*Trade's VP of Retail Brokerage.
Scottrade defines the active trader who qualifies for its ScottradeELITE advanced trading platform as someone who has a minimum of $25,000 in assets, but there are no trading requirements, according to Todd Slawson, manager of active trader services at St. Louis-based Scottrade. In June, Scottrade began providing a real-time market data product, Nasdaq Velocity and Forces, free-of-charge to customers that qualify for ScottradeELITE. The tool measures the pre-trade order flow in Nasdaq, NYSE and Amex-listed securities, and is something that institutional brokers previously calculated for themselves, yet Scottrade is not charging for it, says Slawson. Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio
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