Many of these companies did not even exist six years

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over the Internet. Many of these companies did not even exist six years before. The arrival of the Internet had lowered barriers to entry and allowed these companies to enter the stockbrokerage industry and compete against established brokers. As the competition for the business of online investors started to heat up, commissions started to fall. By early 1999, online brokerages such as E*Trade were charging deep discount foes of $14.95 per market order for trades of up to 5000 shares. Thus, whereas an order for 1,000 shares of stock trading at $20 a share could cost the client of a full- service broker as much as $500 in commission, the same trade could be executed over E*Trade for $14.95! Attracted by such low prices, from little more than a trickle in 1994,
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the volume of online trades grew to account for 40% of all stock trades by individuals as of mid- 2000. Discount broker Charles Schwab emerged as the leader of this new segment, with eight out of ten online trades in 2000 being executed by Schwab. At first, full-service brokers derided online trading as dangerous and justified their high commissions by claiming that they offered their clients sound financial advice and proprietary research reports. However, with as many as 40% of all stock brokers lacking much in the way of experience and with the rapid increase in the amount of investment information that could be accessed online, such arguments sounded increasingly shrill and self-serving. By early 1999, it was becoming apparent that full-service brokers needed to adapt to the new technology or risk seeing their client base evaporate. The landmark event occurred in June 1999 when Merrill Lynch, the world largest full-service broker, bowed to the inevitable and announced that it too would soon offer its clients the ability Stockh Want Sive computer hardware could trade online to call a stockbroker and place an ancial, Then, For years, only professional stockbrokers with expensive ter hardware could An individual investor who wanted to buy or sells to call a stockhooker order, for which the stockbroker would charo roker would charge a commission. At full service stockbrokers as Merrill Lynch, which offer clients detailed research reports stock recom offer clients detailed research reports stock recommendations, financial planning services,
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these commissions run to 2.5% of the value an order worth $10,000 could generate $250 in commissions. mall discount broker, K. Aufhauser The situation began to change in 1994 when advantage of new technology to become the first to offer its client the ability to the Internet, effectively bypassing stockbrokers 5% of the value of the order. Thus,
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