1-2. Business Process

The market for the brokerage services is very competitive the intense competition will likely lead to price wars. The initial stages of competition will focus on the commodity style segment of pure trading transactions (the part that could be automated without any support and service). Evidence of this is already apparent, Charles Schwab recently reduced the price of its Internet trade commission to $29.95 per trade (for 1000 shares). While E-trade offers customers a trade on the Internet for $14.95 without chart and news, and supporting its primary trading services. We can expect the cost of this segment of the business to decline as more competitors shall enter the market.

The electronic brokerage business is a large and so far an underpenetrated market. The on-line brokerage accounts only for 2% of the total 60 Million account market. Forrester Research estimates the growth in Internet trading share of the market to amount to more than 15% of the total accounts.

In general the growth in accounts comes from individuals between the ages of 35 and 50, who are technology savvy and invest based on their own knowledge of the stock market. While the average client of a full service house is over 60 years and prefers the broker to handle all investment decisions. The account growth shall be fundamentally fueled by clients migrating from deep discount brokers, first time investors who wish to experiment with the stock market.

The second stage of competition will focus on the expansion into other vertical markets such as clearinghouse activities. where savings of $2 per trade could be generated and where companies such as E-Trade are realizing cost savings of up to $2,000,000 per year in the first year of clearing house operation, such savings could increase to above $10,000,000 per year for the third year. And by achieving further scale in such operation such activities could become one of the core focuses of the early entrants.