The arrival of large full-service brokerages on the Internet and the evolution of the on-line target market has changed the playing field for Internet trading, according to executives from several on-line brokerages.

At Jupiter Communications' on-line financial services conference last week, these executives pointed to Merrill Lynch & Co.'s shift this year to on-line trading as a sign of the times, in which traditional brokerages adopt the Internet as a delivery channel and compete with the on-line pioneers.

"On-line brokerage is dead," said Glenn Tongue, president of DLJdirect Inc. "There's no longer the on-line brokerage cocoon in which we all operated last year, which is too bad, because it was fun back then. Today we're competing with every single brokerage company in America."

Traditional brokerages are not the only institutions that on-line brokerages will compete with, Mr. Tongue and others said. The expansion of Internet brokerages into banking services has become a widely watched trend.

The strong growth of the Internet and on-line trading itself means on-line brokerages' target audience is becoming more mainstream, according to several executives.

The number of households trading on-line will grow from approximately four million in 1998, to more than 20 million in 2003, Jupiter predicted. But the number of trades and commissions per household will drop, requiring brokerages to focus more on gathering customers' assets rather than on transaction fees.

"The challenge for us ... is to be able to grow our customer base, to gather those assets, and to do that in a cost-effective fashion," said Dennis Marino, chairman and chief executive officer of National Discount Brokers Group.

But the executives had different game plans for dealing with the changing environment.

To reach a broad range of customers, DLJdirect and Fidelity Investments are promoting a variety of research and products, some of which are not traditionally considered brokerage fare.

"On-line enablement of brokerage capabilities is table stakes," Mr. Tongue of DLJdirect said. "Table stakes a year or two from now will be having a full suite of financial services," including banking, mortgage, and insurance.

Sean Belka, a senior vice president at Fidelity, stressed that running an on-line brokerage is really about customer "relationships, not transactions."

Fidelity has partnered with other institutions to offer a "rich and compelling grid" of services to enhance those relationships, Mr. Belka said. Through such a partnership with American Express Co., Fidelity offers a charge card linked to its brokerage accounts. The company also offers bill payment services from Checkfree Holdings Corp. and recently announced an agreement with Lycos Inc. to allow customers to personalize the Fidelity site.

But Michael Anderson, corporate vice president of Ameritrade Holding Corp., said that for the time being his company would stick to its niche of on-line discount brokerage.

"Right now, people find it simple to use us for brokerage, someone else for banking, and someone else for insurance."

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