History of Online Stock Trading

It's hard to believe that at one time, no one placed an order without talking to a broker. It's even harder to imagine that the average person had no access to the web for their personal use before 1979. Businesses used it, in fact, CompuServe became a leader in providing services to the financial industry by linking commercial feeds together to provide a quote system and financial information to Wall Street.

History

Before 1979, when CompuServe marketed MicroNET to consumers, no individual used the net, just businesses. MicroNET, the retail branch of CompuServe, found an outlet at Radio Shack and soon gained wide appeal and it accounted for over 50 percent of the company's income by the year 1987 when it took back the parent name, CompuServe. The Source, its competitor that also started in 1979, grew rapidly. However, CompuServe bought them out in 1989.

Time Frame

Imagine the enthusiasm of Bernie Newcomb when Phil Porter shared his idea about trading stock on a personal computer back in 1980. Newcomb understood programming and developed the necessary one to successfully trade a stock. A dentist in Michigan made the first stock trade on July 11, 1983. This was the first trade for the company Trade*Plus. It took 9 more years before the company was named the fastest growing company in Silicon Valley and by 1996, Trade*Plus received the new name E-Trade Group.

Features

Other companies entered the market for consumer stock trading. First Omaha Securities, Inc. became a clearing broker in 1983. It changed its name to Accutrade. Later when they were part of a holding company in 1987 the name changed again to TransTerra Company Inc 1987 and eventually became AmeriTrade in 1996. It offered the first order system via the touch-tone phone in 1988. Slowly the necessity of the broker started to seem less important.

Considerations

Bernie Newcomb and Phil Porter split as partners and Porter started a new company, E-Trade Group. E-Trades Securities was a subsidiary, and the primary reason for the company. It offered services to the public that allowed trading on both America Online and CompuServe. Later when the firm grew dramatically, by 1996, it went public and the changed the name to E*Trade Financial.

Effects

The market gets bullish for the 1990's. This fact, coupled with the lower cost of Internet access started to drive the uses of the Internet. Communication via email and total access to the web made the transition easy for millions of people. Now, they no longer had to call a broker or schedule an appointment. The Web was open 24 hours a day and the market was hot. By January of 1996, AmeriTrade introduced "Accutrade for Windows" and developed the first eBroker.

Benefits

Discount brokerage houses grew, as did online trading. Schwab, one of the innovators of discount brokerage services, offered the first 24-hour quotation service to clients in 1980. By the year 1996, they offered live trading on the web. Other companies also jumped into the action. The American public fell in love with online trading because even an idiot could make money in the stock market during the excessively bullish 1990's. The cost of a trade was dramatically lowered. At first, a $24 trade was magnificent. However, as companies grew more web-based the price dropped. When the market went south in 1999 and early 2000, web brokers slashed even more at the cost of the trade to maintain their clients. Today, Online stock trading accounts are owned by most people that invest. Even if they use the services of a broker, they normally have the option of trading stock on their own, via the Internet.