Investors Trade Shares And Grab Data On-Line

If you've got a computer, some special software, and access to an on-line service, you're in business to do your own stock trading electronically - right from the comfort of your home. If you are really bold, you can even trade through the Internet.

Welcome to the electronic stock market of the 21st century.

For thousands of individual investors, personalized computer trading is now at hand, putting them almost on an equal footing with high-powered brokers at major investment houses who buy and sell securities. The brokers, of course, have extensive back-up services that a private investor does not have, such as huge research departments.

But a number of major investment houses, particularly discount brokers, are offering or preparing to offer a broad range of on-line financial services. These include new stock offerings, the buying and selling of securities, research reports, and counseling.

There are now 624,000 on-line financial accounts in the United States, up from 412,000 last year, according to Forrester Research Inc. in Cambridge, Mass. The firm predicts the number will climb steadily, reaching 781,000 by the end of this year, and 1.3 million by the end of 1998. But that will still be only a small portion of America's 60 million regular brokerage accounts.

On-line trading will eventually change the nature of the way stocks are bought and sold, predicts William Bluestein, group director of new media research for Forrester. That is not to say that all investors will eventually jump to personalized computer trading, or that all investment houses will move their businesses to World Wide Web sites. "Many investors will continue to want the type of personalized counseling" that the brokerage house system has traditionally provided, he says. Still, Wall Street firms will eventually need to play some type of role on the information highway, Mr. Bluestein says.

Linking to brokerage house

Most of the current on-line accounts use customized software to link customers directly to discount brokers, such as Charles Schwab and Quick & Reilly. (Some accounts hook people up with discount brokers over the Internet, as Schwab hopes to do starting in May.) About 22 discount brokers offer on-line accounts, says Marie Swick, an analyst with the American Association of Individual Investors (AAII) in Chicago.

To trade electronically, Ms. Swick says, you must have a specially designed software program, such as Street Smart, for Schwab, or Quickway Plus, for Quick & Reilly. The software usually costs between $30 and $50. You then dial up the company directly, using your software, or go through a designated on-line service.

Trading commissions for discount brokers are usually the same on-line as for regular customers, but a few firms, including Schwab and Quick & Reilly give discounts for trading on-line.

A survey of discount brokers, and the electronic options they offer, is available for $4 through the AAII, at 625 North Michigan Ave., Suite 1900, Chicago, IL, 60611. The survey is also available through the AAII site on America Online (AOL), the largest on-line service.

In addition to firms allowing transactions, such as Charles Schwab and Fidelity Brokerage Services, a number of firms provide financial information through on-line programs, including Reuters, Dow Jones & Co., Standard & Poor's, Morningstar, and the Motley Fools (an AOL site that is especially popular with younger investors).

Internet options: few but growing

The Internet, too, has lots of services offering investment research, stock quotes, and the like. This month, for example, the Nasdaq market joined that crowd.

The two main firms trading securities over the Internet are E*Trade Securities, and Lombard Institutional Brokerage.

If you use the Internet, you must visit the company site. Lombard, for example, is at http://www.lombard.com; E*Trade's site is http://www.etrade.com.

E*Trade has low fees: $14.95 to buy or sell up to 5,000 shares of any stock on the American or New York Stock Exchanges, and $19.95 for a Nasdaq market stock.

One challenge facing any firm offering to buy and sell stocks over the Net is security - preventing hackers from gaining access to proprietary trading account information.

"Security on the Internet is a work in progress," Bluestein says. "There have been huge strides since last year, and much more is expected by the end of 1996." He expects enough new security arrangements to be in place later this year to enable hesitant investment houses to step forward with direct trading programs on the Net.

Most of the full brokerage houses that now have Web sites offer only research material (not trading), and on a limited basis. Merrill Lynch & Co., for example, provides research reports and delayed stock quotes. Meanwhile, Prudential Securities allows an investor to find out the market values of his or her securities, plus current balances on accounts.

Banks and mutual-fund companies are expected to join brokerage houses in offering Internet services.

Banks would seem to be natural players, Bluestein says, since customers are frequently shifting money between accounts (such as deposits from savings to checking), or buying and selling certificates of deposit.