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Online Broker Review 2011

Yearly Review of Stock Brokers

After several hundred hours worth of extensive research and testing, the stockbrokers.com staff is proud to present its 2011 Online Broker Review. For 23 brokers ( E*TRADE, TD Ameritrade, Charles Schwab, TradeKing, optionsXpress, OptionsHouse, Interactive Brokers, Fidelity, Scottrade, Firstrade, tradeMONSTER, MB Trading, Zecco, TradeStation, Lightspeed Trading, Choice Trade, SogoTrade, SpeedTrader, Just2Trade, Sharebuilder, Muriel Siebert, Cobra Trading, and WallStreet*E) we evaluated their customer service, researched stocks, tried new tools, tested platforms, and everything in between. Our No. 1 priority is to provide investors with the most pertinent information in order to find the best online broker to suit their investing styles and needs. Contained in this review is our in-depth analysis for the following seven categories:

This review caters to both the casual investor and active trader. By utilizing our 2011 Online Broker Review, in addition to the other various tools and reviews on our site, investors will be able to determine what broker is best for them, whether they are just opening a new account or already managing a portfolio.

The online brokerage industry is continuously evolving and subsequently improving its offerings for investors. With advancements in mobile smart phones, Internet accessibility via fiber lines, and computing power, it is an exciting time to be an active part of the online investing community.

Commissions and Fees

What investors pay for trading stocks, options, ETFs, and mutual funds is one of the primary factors most investors take into consideration when choosing an online broker. Instead of focusing on just cost, though, we also took into account the fees that brokers charge: platform fees, specialty order-type fees, minimum fees, etc. These are important and applicable to a wide variety of investors and often overlooked until after the account has been opened.

The online broker that stood out among the rest as the best for discounted trading was OptionsHouse. The discount broker charges $3.95 for flat-rate trades, $9.95 for mutual funds, and options investors can choose to either buy up to 5 options contracts for $5, or pay $8.95, plus $.15 per contract. Its parent company, Peak6 Investments, has hundreds of millions of options contracts traded under its belt, and it leverages this expertise to deliver ultra-competitive commissions.

Other highly rated brokers in this category include Lightspeed, Interactive Brokers, TradeKing, MB Trading, Zecco, and SogoTrade. Lightspeed came in second with its tiered rate of $.00395 per share, but the broker also charges a minimum $1 per order for standard Web Trader clients, as well as a $.40 fee for any odd lots (i.e., 99 shares). The other alternative is paying a flat $4.50 per trade. Zecco offers $4.50 stock trades and up to 10 free trades per month for clients that have atleast a $25,000 balance or make 25 trades each month.

For investors that trade Exchange Traded Funds (ETFs), in 2010 the commission-free ETF was introduced as a way to offer further value to clients. ETFs are very similar to mutual funds except that they trade just like a stock and typically offer much lower yearly management fees. TD Ameritrade, Charles Schwab, and Fidelity are the leaders in this unique offering, with TD Ameritrade having the largest selection of more than 100 commission-free ETFs.

When conducting our research, we found that brokers who charge extra fees or hefty minimums consequently ended up costing more than the rest, even if their commissions were reasonable priced. Interactive Brokers’ commission structure is very competitive, but the additional fees, unfortunately, are not. The broker charges a maintenance fee if clients do not spend at least $10 in commissions per month, as well as a $10 fee per month for real-time quotes. The only way to waive both of these is to spend at least $30 in commissions each month. Similarly, optionsXpress charges its clients no base fee for options trades, however, they charge as high as a $14.95 minimum per options trade if the client is making less than 35 trades per quarter.

All in all, when it comes to commissions and fees, we find that the best commission offering is a clear and transparent one. The average investor does not have time to sift through pages of commission information, platform fees, maintenance fees, etc. (which our full broker reviews break down). Whether charging hefty minimums per trade or extra fees such as minimum activity fees, in the end it is another cost that reduces investment gains.

Customer Service

Great customer support means it’s easy to access, and users get a fast response and an enjoyable experience. When evaluating customer support for each broker, we first took into consideration the overall offering: phone support, e-mail, live chat, and help tutorials/FAQs. The time and days of the week these services were offered also came into play. Next up was how quickly the broker responded to our questions. Finally, the experience itself is crucial as some reps truly left us satisfied as clients.

While there were several brokers that we rated as five stars for customer service, the best in our research was TD Ameritrade* with a very close second going to Charles Schwab. TD Ameritrade* had us connected to a rep on the phone within minutes, and our e-mails were always promptly returned with professional and thorough answers. One unique feature we particularly enjoyed was Ted, the virtual client support representative, who made answering basic questions about the site very easy (fees info, finding forms, etc.). Combine this with thinkorswim from TD Ameritrade's live chat support*, and we couldn't be happier.

In a close second, Charles Schwab wowed us with its first-class phone support. Within 30 minutes of opening a new account, a representative called us to answer any questions. When we told them we were interested in testing their platform before funding an account, they graciously offered us temporary "Schwab Active Trader" status to test all of their premium tools. A week later, we had another follow-up call to see how everything was coming along. The only downside to Charles Schwab: no live chat support.

While testing customer support in general, we experienced a wide variety of interesting situations. ChoiceTrade's live chat rep didn't even have a name, answered questions with no further links or help, and topped it off by ending the session without even a goodbye. With Fidelity, the service rep we encountered was very kind and helpful, and after letting her know we were a more active investor seeking to test their platform with our new account first before funding, she informed us that a rep would phone us very soon to be of further help. Unfortunately, it took a full week for a Fidelity representative to finally call us.

We did, however, have some great experiences, our favorite being Zecco's live chat. The agent gave very detailed answers to numerous questions, used professional phrases such as "that is a great question," and ended our session by wishing us “Happy Holidays!” — a top-notch experience in our opinion.

When it comes to customer service, the ability to suit the needs of your client day in and day out is no easy task. For those brokers that succeed in delivering a unique experience through multiple means, the reward is a happy, long-term client who will likely bring more investors through the door.

Options Trading

When searching for the best brokers for trading options online, we wanted to focus on not only the tools for researching options but also the commissions. In addition, we investigated how easy brokers make it for clients to actually place orders. The overall experience of trading options varies from broker to broker, depending on what clients seek.

We found that OptionsHouse offers the most competitive options commissions rates with two straightforward plans. Clients can trade up to 5 contracts for $5 with any further contracts costing just $1 each or $8.95, plus $.15 per contract. Any exercise or assignments is only $5. Overall, OptionsHouse gives investors the advantage of choosing the plan that is best aligned with their own personal trading habits. Its parent company, Peak6 Investments, is one of the largest options trading firms in the U.S. While OptionsHouse has great commissions, though, its order entry is more complex and not casual investor friendly.

Focusing on ease-of-use, TD Ameritrade's thinkorswim platform*, tradeMONSTER, and MB Trading's Options Strategist all had great offerings for options traders both casual and experienced. tradeMONSTER and MB Trading both do a fantastic job of visually showing clients what they are trading, whether it be as simple as a covered call or as complex as an iron condor. tradeMONSTER had a high "wow" factor with its clean and easy-to-use interface. On the contrary, MB Trading impressed us by tying in education, explaining what each strategy is with key points, and a full example breakdown of how an options trade would work.

For investors who are looking for advanced options trade tools, TD Ameritrade's thinkorswim platform* has the most robust offering. SpreadHacker allows investors to easily find the most profitable, low-risk trades for butterfly, calendar, and vertical spreads. Our testing narrowed down from almost 200,000 possible matches using multiple criteria such as price, profit probability, and delta, among others. Additionally, the SpreadBook tool allows users to view all currently active spread orders on the platform, sortable by ticker and spread type. Finally, for eye candy, users can utilize Widget 360 to view current call and put option interest on charts.

Overall for options trading, every five-star-rated broker this year brings something unique to the table. Whether it be advanced options tools, a visually appealing interface, ease-of-use, or simply discounted commissions, the brokers we rated as the best will satisfy all options traders and their needs.

"Best of" Research, Platforms, and Tools

For this particular section, we decided it would be more useful to individually break down the most unique tools, platform, and research offerings from online brokers. After testing and observing all brokers throughout the past year, we found the following ones stood out:

Best Trade Simulator — tradeMONSTER

For investors looking to use simulated funds to test out strategies and invest with prior to funding an account with real money, they will be right at home on tradeMONSTER's stock and options simulator. We found the tradeMONSTER simulator to be the best because of its clean interface and ease-of-use for new investors just getting started. The tradeMONSTER platform runs on Flash, giving it a more unique experience versus placing trades off a traditional broker website. Clients have the ability to trade all types of options trades, including advanced spreads and several stock order types (limit, market, stop, and stop limit). Once clients get the hang of their simulated account and fund a live portfolio, they will utilize the exact same platform for placing real trades, which makes for a seamless transition.

Best Investor Community — TradeKing

TradeKing was the first broker to really focus on building a community for its clients. Known as the Trader Network, one of its original features — blogs — is still intact today. The CEO of TradeKing, a.k.a. "bigdog," has his own blog and writes several times a week. All members have the option to share their verified trades with the rest of the TradeKing network, write their own blog posts, trade notes, send private messages to one another, and also participate in investor groups. By going to the trading activity page, members can see the most frequently traded stocks and even a live order stream of both stocks and options being traded. TradeKing tops this off with its All-Star's blog, where experienced investors post insightful articles on not only education but also the market itself.

Best Platform for Conducting Research — Charles Schwab

Charles Schwab provides a vast amount of quality and thorough research for investors to utilize. When it comes to mutual funds, Schwab, like its closest competitors Fidelity and TD Ameritrade, boasts Morningstar ratings and full data for thousands of funds. Not only can key data such as fund fees, historical performance, and holdings be broken down, but also a full mutual fund report card can be viewed in PDF format. What put Schwab first, though on our list is its vast collection of market research articles written by Schwab staff experts. This roster of talent includes Chief Investment Strategist Liz Ann Sonders, who is often seen on Yahoo Tech Ticker, and more than 20 others with topics ranging from the economy and market to retirement and personal finance. Throw in a variety of third-party research reports from the likes of JP Morgan and Credit Suisse, among others, and investors have a complete research arsenal at their disposal.

Best Investor Education — E*TRADE

When we looked for a broker to name as the top provider of investment education, our want list was very thorough: articles, term definitions, videos, and webinars. E*TRADE came out on top after we found everything we desired and more. The broker offers more than 1,000 investment term definitions, provided by InvestorGuide. Numerous videos and articles cover topics ranging from the basics on how to trade to advanced trade types and concepts. Articles are provided by the likes of SmartMoney, Morningstar, Investopedia, Forefield, and the E*TRADE staff. Our favorite feature was the three-minute videos section, which highlights educational tips and advice for trading online. Currently only six videos are available covering basic topics, but more are on the way. Lastly, everything within the education area is organized by category and difficulty, making navigating the education center a smooth and effortless experience.

Most Unique New Tool of 2010 — Autotrading

As auto trading becomes more and more popular through services like Covestor and Wealthfront, additional providers are beginning to join the trend and develop technology to support auto trading. Auto trading is just what it sounds like: automatic trading of investments. Stock brokers started getting involved in mid-2010 by offering clients the ability to auto trade the stock and options picks of popular investment newsletters. OptionsXpress was the first to implement the technology through its Xecute service, and at the time of this review supports 46 different investment publishers for auto trading. Other brokers that have also adopted the technology include tradeMONSTER and most recently TradeKing. Besides being a subscriber of the investment newsletter service itself, the only other cost to use are the commissions charged by the broker.

Most Improved Website of 2010 — Firstrade

Firstrade made quite an overhaul when it finalized its transition to the new Firstrade site design and platform in late October 2010. Originally called FirstradeNEXT, the platform boasts a far superior design both visually and functionally. Site updates include social media integration via Facebook and Twitter, new stock screeners and alerts, and an order entry box that allows for quick quotes and trading on every page. The broker also upgraded its clearing operations from Ridge to Penson in June and closed the year by launching its iPhone app on December 29.

Active Trading

For those independent investors that trade actively, the game of online trading changes, as it is more serious and, in some cases, is a full-time job. While an investor planning for retirement cares about third-party research reports and fund management fees, the active trader has his or her focus on a completely different spectrum.

Having active trading experience ourselves and knowing many active traders, we understand that commissions, site speed and ease-of-use, execution, customer service, and a robust trading platform are the focal points in an active or day trader’s world. As a result, these were our focus areas for our research, and what we ended up finding was that competition is fierce and the key to success for some firms is honing in on one area and working hard to have the best offering.

When it comes to the best platform for active traders, we found that the thinkorswim platform by TD Ameritrade* stood out as number one. The thinkorswim* platform offers traders flexibility, speed, and endless professional tools. During testing, we expanded 16 charts across our three 24" LED monitors and experienced no speed issues while performing advanced technical analysis and monitoring level II quotes and real-time sales for numerous securities. We then started to stream live CNBC coverage on our sidebar, read news on the fly, and talked stocks with other traders in the Trader Lounge, one of eight different chat rooms. What makes the thinkorswim platform really stand out, though is the technical staff managing and constantly updating the software, as well as the customer service team that’s ready to assist traders via online chat support. All in all, TD Ameritrade's thinkorswim platform* is the real deal.

For the investor looking to trade it all — stocks, options, futures, and forex — MB Trading is the broker to trade with. Competitive commissions and multiple platforms give each investor the tools, flexibility, and speed they need to handle their demanding needs. MBT Desktop Pro is offered for equities, futures, and also includes the Options Strategist tool, which we found to be one of the best offerings for trading options. From performing technical analysis with more than 100 different indicators to writing custom alert scripts, MBT Desktop Pro is a full offering. For forex trading where the broker shines the most because of its ultra-tight spreads and clear offering, MBT Metatrader 4 is available to clients. Metatrader is most widely used for front-end application in the forex industry as a whole.

Active traders who are investing internationally will find that Interactive Brokers is the leader among its peers by providing access to more than 80 different markets worldwide through its flexible platform, competitive commissions, and quality executions. While E*TRADE is also very notable in this area for international trading, active traders will find that the Interactive Brokers offers trading through more markets with lower overall costs.

As far as commissions were concerned, Lightspeed, Interactive Brokers, and MB Trading all stood out as best of class solutions for active traders. Interactive Brokers offers heavily discounted commissions for the active traders trading stocks and ETFs that Lightspeed, while still very competitive, could not match. And while Lightspeed did have the best options rates, $.60 per contract with no minimums, the broker charges $25 for each exercise or assignment, whereas Interactive Brokers is free. Looking beyond equities and options, MB Trading shined with its ultra-tight spreads, no hidden markups, and straightforward routing fees.

Lastly, it is important to note that online brokers, regardless of their size, are very aware that active traders accumulate the most commissions and ultimately bring in the most profits. Out of all the active traders we spoke with for this review, the most common theme we found was that customer service is the backbone for a long-term relationship. Top-notch customer support gives active traders the confidence that their broker is not only dependable but on their side. Most often this means that long-term, commission rates are reduced and extra services fees are also waived. Since many active traders are investing as a primary source of income, settling for just an average broker is not an option.

Overall Rankings Table

  Broker Name Commissions & Fees Ease of Use Tools & Research Customer Service Offering of Investments Education Mobile Trading Overall
1. E*TRADE Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star 5 Stars
2. TD Ameritrade* Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star 5 Stars
3. Charles Schwab Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star 5 Stars
4. TradeKing Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star 4 Stars
5. optionsXpress Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star 4 Stars
6. OptionsHouse Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star 4 Stars
7. Interactive Brokers Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star 4 Stars
8. Fidelity Investments Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star 4 Stars
9. Scottrade Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star 3 Stars
10. Firstrade Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star 3 Stars
11. tradeMONSTER Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star 3 Stars
12. MB Trading Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star 3 Stars
13. Zecco Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star 3 Stars
14. TradeStation Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star 3 Stars
15. Lightspeed Trading Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star 2 Stars
16. Choice Trade Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star 2 Stars
17. SogoTrade Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star 2 Stars
18. SpeedTrader Star Star Star Star Star Star Star Star Star Star Star Star Star Star Star 2 Stars
19. Just2Trade Star Star Star Star Star Star Star Star Star Star Star Star Star 2 Stars
20. Sharebuilder Star Star Star Star Star Star Star Star Star Star Star Star Star 2 Stars
21. Muriel Siebert Star Star Star Star Star Star Star Star Star Star Star Star Star 2 Stars
22. Cobra Trading Star Star Star Star Star Star Star Star Star 2 Stars
23. WallStreet*E Star Star Star Star Star Star Star Star Star 1 Stars

* - TD Ameritrade includes thinkorswim platform. Merger to be completed in 2011.

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