Thus discount broker k aufhauser co took the ability

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bypassing stockbrokers 5% of the value of the order. Thus, discount broker, K. Aufhauser & Co., took the ability to trade online over Tewer personnel, and the cost savin y bypassing stockbrokers. The offering allowed Aufhauser to operate with t o customers in the form of lower commissions. At first, online trading was nothing more than a curiosity, but several thing changed this. First, the Internet started to make and inreads into the homes of individu Americans. Second, within a short space of time vast amount of investment information was being offered in the Internet. Individual investors soon found that they could go to sites such as the Motley Fool at America Online or Yahoo's finance site and get much of the information that they needed to make informed investment decisions No longer did they have to call their Stockbrokers to ask for information. Third, a number of small companies quickly followed Aufhauser's lead and took advantage of the Internet to offer their clients online trading for commissions that were significantly below those offered by full-service stockbrokers in the physical world. Finally, the market drew ever more individuals into the stock market, particularly young people, who were drawn to investing in order to build up funds for retirement. Increasingly, these newcomers set up online trading accounts. The effects of these trends were
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dramatic. By mid 2000.150 firms were offering online trading 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, 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
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