E-Trade Financial Corp., which used to guarantee execution of many trades within nine seconds of online orders, has upped the ante to two seconds.
The New York online brokerage said Thursday that it is guaranteeing the faster trades for 100 to 500 shares of any Standard & Poor's 500 company. There is no guarantee for smaller or larger trades, but the first 500 shares are likely to trade in two seconds, the company said.
Fidelity Brokerage Services Inc. has a five-second guarantee on such trades, as does Ameritrade Inc. on trades of 100 to 1,000 shares of S&P 100 companies.
E-Trade first offered the nine-second guarantee in 2002. "We're setting the bar real high at two seconds," said Michael Curcio, its executive vice president of retail brokerage.
He said the new guarantee will be marketed as aggressively as the previous one, which was launched with an ad campaign based on the slogan "Power of 9." That "really helped us gain market share in '03," Mr. Curcio said. "We gained every quarter."
Tim Carpenter, a senior analyst at the market research firm Watchfire GomezPro in Waltham, Mass., said E-Trade has "some customers who really care about quality and speed."
Faster executions help customers avoid losses arising from price swings on volatile stocks. He noted, however, that orders can be delayed if the customer has a bad Internet connection.
Investors like assurance that as many shares as possible fetch the same price by being traded simultaneously, Mr. Carpenter said. But limiting the guarantee to S&P 500 stocks excludes those more vulnerable to price shifts, he said.
Still, the timing of the announcement will work to E-Trade's advantage, Mr. Carpenter said. "We're in a cycle right now where investors are trading more actively," he said.
Trading surged in January, which included the biggest trading day in Ameritrade's history. Analysts interpreted a February slowdown as signaling that investors were happy with their earlier trades and in no rush to change their portfolios again.
Still, investors are considering alternatives and may be looking to switch brokerages, Mr. Carpenter said. "E-Trade goes after the active investors, as does every other brokerage," and some active investors may not have the patience to wait three extra seconds, he said.
The two-second guarantee is "definitely a marketing tool that works, but it's not a solve-all," Mr. Carpenter said. It is just part of the full package that active investors look for in a brokerage, he said.
