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Suretrade

SURETRADE
Former type Private
Industry Finance and Insurance
Fate acquired by Bank of America
Founded 1997
Defunct 2001
Headquarters Bristol, Rhode Island
Key people Donato A. Montanaro
Products Financial Services
Revenue $100M USD
Employees 1,000

SURETRADE was a Bristol, Rhode Island–based investment firm created in 1997 as one of the first online brokers of the dot com era. Before being absorbed by Fleet Boston's Quick & Reilly in 2001, the Rhode Island firm grew to having over 350,000 customers and nearly $2 billion in assets.

History

SURETRADE's rapid rise was fueled by a radical business model at the time – no retail branches and a $7.95 flat fee per trade commissions for trades executed through their Internet trading platform.[1] They were one of a new breed of online only brokerage firms such as Datek, Ameritrade, E*Trade and DLJDirect that sought to democratize access to the stock market by charging low, flat fee commissions and delivering customer service exclusively through online and toll free phone channels.[2]

In an October 1999 Fortune (magazine) article SURETRADE's president, Donato A. Montanaro claimed that they were rated the #1 broker for aggressive traders and the #2 broker for beginning investors. [3] The firm was a division of Quick & Reilly a traditional discount broker who served clients over the phone and in retail branches.[4]

Online brokerages like SURETRADE were considered 'deep discount' brokers and an alternative to full service firms like Merrill Lynch who charged more costly commissions based on the number of shares traded. Established 'discount' brokers like Charles Schwab typically charged commissions higher commissions than the less than $10 per trade charged by the 'deep discount' firms.[5] By paying less in commissions to the new breed of online brokerages, customers could lower their cost basis and keep more of their trading profits. The online order entry system empowered the self-directed investor with a higher degree of control and speed over their trade executions compared to executing a trade manually by calling a full service stock broker. [6]

In addition to a rising stock market that created favorable conditions for a new breed of 'day traders', SURETRADE's growth was fueled by nearly a hundred million dollars in TV and Internet advertising which generated new accounts and familiarity with the SURETRADE brand.

Discount stock brokerage behemoths Charles Schwab and Fidelity took notice of the online brokerages success and soon changed their commission structures to a flat, albeit higher, fee structure. Full service leader Merrill Lynch rolled out a Merrill Lynch Direct online brokerage in 1999.[7]This was widely viewed as an effort to stem the tide of assets being transferred to the online brokerages.[8] Many investors felt comfortable making some trades without the advice of a personal broker.

The ascent of the online brokerages was cut short by the burst of the dot-com bubble of 2000-2001, when values of many of the most heavily traded NASDAQ stocks plummeted. At this point Quick & Reilly had been acquired by FleetBoston Financial, who tolerated SURETRADE when it was profitable. However, in the wake of the dot-com crash, 'Dot-com company' and 'day trading' were popularly viewed as causes of the NASDAQ's melt-down. In shuttering the SURETRADE brand in 2001 FleetBoston sought to disassociate itself from these controversial labels which were seen to be at odds with responsible finance. They folded SURETRADE's operations and accounts into Quick & Reilly.[9] Customers who stayed eventually became clients of Bank of America Securities in the 2004 acquisition of FleetBoston.[10]

While the original online brokers faded from the landscape in the early 21st century, their legacy of radically lowering costs and empowering individual investors with online education and financial tools continues to be dominant driver of customer satisfaction in the investment industry.

See also

References

  1. ^ Paul R. La Monica, " Take Heart, BankBoston Investors ", " Smart Money , March 15, 1999. Accessed 13 September 2009.
  2. ^ Geoffrey Smith, "Your Guide to Online Investing", Business Week, May 24, 1999. Accessed 18 September 2009.
  3. ^ Joseph Nocera, "Power to the People INVESTING HAS BECOME PART OF EVERYDAY LIFE IN MIDDLE-CLASS AMERICA", Fortune, October 11, 1999. Accessed 18 September 2009.
  4. ^ Fleet Financial Group, " Fleet Financial Group Expects Its SURETRADE Internet Broker to Post Record Trading Activity ", " Business Wire , March 11, 1999. Accessed 12 September 2009.
  5. ^ Theresa W. Carey, "Beyond Cool", Barrons, March 16, 1998. Accessed 18 September 2009.
  6. ^ U.S. Securities & Exchange Commission, "Investor Tips: Trade Execution", U.S. Securities & Exchange Commission , June 22, 2004. Accessed 18 September 2009.
  7. ^ J. Alex Tarquinio, " Bull charges discount online ", "Forbes, November 27, 1999. Accessed 15 September 2009.
  8. ^ Rosalyn Retkwa, " Update: Merrill Lynch Direct ", " Registered Rep Magazine , March 1, 2001. Accessed 14 September 2009.
  9. ^ David McPherson, " Bank merger signals the end for Quick & Reilly ", The Providence Journal, June 3, 2004. Accessed 16 September 2009.
  10. ^ Kimberly Blanton, " Merger Partners Bank of America, FleetBoston Financial Name Management Team ", The Boston Globe, December 9, 2003. Accessed 17 September 2009.
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