Annual Ranking

Of the Best Online Brokers

By THERESA W. CAREY

TradeStation is new overall champ in Barron's 13th annual

ranking of the Best Online Brokers. Check our chart to find
the firm that clicks with you. ( Online Brokers Slideshow)
TURNING THE COMPLICATED INTO THE SIMPLE is a basic aim of online brokerage. It
means bringing together the prices of everything from Nokia shares to options on South African
gold to U.S. Treasury bonds on a single platform. It means simultaneously offering insights into
Malaysian politics and Florida housing costs while organizing millions of electronic messages
from global bourses for data, orders and transactions into information that investors can act on
instantaneously.
Increasingly, these brokers must try to make intricate derivative structures understandable. And
all this must be served up at credible prices.
Barron's brief in our 13th annual ranking of the Best Online Brokers is similar. We've pored over
the offerings, operations and pricing of 23 firms to hone in on the best ones. Why not just one?
It's our view that different keystrokes work better for different folks. In other words, buy and
hold investors don't need all the turbo-charged power and performance that frequent traders do.
And options and international players have their own requirements. So we name one best overall
broker and the leaders in four other categories. You can even use our tabulations to come up with
your own five-star broker based on personal preferences.
This year it's simple: A first-time victor -- boasting very powerful trading technology and topnotch analysis, charting and backtesting -- won in four of our five categories (overall, options,
frequent traders and international).
We've done our own streamlining this year. For the first time, we evaluated the brokers as a
single group rather than dividing them into software and Web-only categories. Software-based
brokers were once assumed to be aimed only at extremely frequent traders, while Web-based
brokers were designed more for buy-and-hold investors. These days, however, capabilities are
converging, and many brokers offer multiple methods of accessing your trading account. In their
quest to grow, some brokers who previously sought out only professional traders are now
targeting less sophisticated users. And vice versa. As a result, the division no longer made sense.
PUSHING THIS CONVERGENCE even further is the application of improved Web
technology and tools like Javascript and AJAX (Asynchronous JavaScript and XML) that give
browser-based systems more of a direct access feel. Web-based brokers now are able to offer
services that were once only seen in software applications, such as streaming data and contextsensitive research.

Although the typical online brokerage told us the number of 2007 trades had risen 20% over
2006, it wasn't an easy year. Shares of E*Trade fell 84% last year. With its bank unit caught in
the subprime debacle, online giant E*Trade is still scrambling to right itself. And consolidation
continued. In April Lightspeed merged its retail operation with Schonfeld Group, creating a firm
dedicated to active traders and hedge funds; Lightspeed later bought another online outfit,
Integrity Trading. ING Direct purchased ShareBuilder while Ameritrade picked up Fiserv's
institutional support unit. Terra Nova, meanwhile, absorbed RushTrade.
Despite the acquisitions, competition remains intense with banks like Banc of America and Wells
Fargo offering free trades for customers with substantial balance. Overall, our analysis puts the
average commission at $6.52 this year, up a bit from $6.35 last year, for a 500-share block. A
number of firms, meanwhile, cut their options commissions last year.
We subjected all these rivals to a rigorous evaluation across eight categories. These included the
types of tradable investments, the quality and ease-of-use of screeners that help you choose
stocks, options or funds as well as the site's overall functionality and potential for customization.
We also looked at the various ways trades can be placed with each broker, such as whether an
order can be submitted from a graph, and customer service. In reviewing costs, we considered
not only stock and option commissions, but the interest rate charged for margin debt; on the flip
side, we compared the monthly income you can generate on your idle cash.
Online Brokers Slideshow
Despite the acquisitions, competition remains intense with banks like Banc of America and Wells
Fargo offering free trades for customers with substantial balance. Overall, our analysis puts the
average commission at $6.52 this year, up a bit from $6.35 last year, for a 500-share block. A
number of firms, meanwhile, cut their options commissions last year.
We subjected all these rivals to a rigorous evaluation across eight categories. These included the
types of tradable investments, the quality and ease-of-use of screeners that help you choose
stocks, options or funds as well as the site's overall functionality and potential for customization.
We also looked at the various ways trades can be placed with each broker, such as whether an
order can be submitted from a graph, and customer service. In reviewing costs, we considered
not only stock and option commissions, but the interest rate charged for margin debt; on the flip
side, we compared the monthly income you can generate on your idle cash.
We assigned a point value ranging from 0 to a high of 5 to our categories, and added up those
points. We performed all our analysis assuming the customer had an online portfolio of about
$100,000, trading at least 36 times per year, which entitles most to reduced commissions, extra
research, higher-level service or other goodies.
Below are our two highest-rated firms overall (4 stars) followed by 21 others that merited star
treatment. We have a separate story on three bank systems. Also included is a table detailing all
23 firms' attributes and an in-depth outline of our methodology.

TradeStation (www.tradestation.com), which earned 4 1/2 stars, is Barron's new overall champ.
What pushes this software-based firm to the top is its incredible trading technology and its
powerful analysis, charting and backtesting capabilities. The system, like a Porsche 911GT3, isn't
for everyone: The average TradeStation customer puts on 640 trades a year, far more than the
typical buy and hold client would ever need. That's why it's our top pick for the frequent trader as
well.
After downloading the current version 8.3 TradeStation software, you can design your own
trading system, backtesting it against a deep historical database to see how well it works (or
doesn't). You can start with your own ideas, or borrow from a huge library of strategies. There's a
$99.95 per month charge for the platform unless you trade frequently, but I've seen more costly
analysis packages that don't do as much.
Options traders can add a program called OptionStation, a very powerful tool that allows them to
create their own options strategies. And the options commissions are reasonable, which helps
explain the firm's victory in that category as well.

The platform dishes up data from its ultra-fast feeds, updating charts and quote screens and
trading programs very quickly. Market orders are filled in a few milliseconds.

Besides stocks and options, you can trade mutual funds, bonds, electronic futures contracts (such
as e-mini's), futures options, single-stock futures, and foreign securities on TradeStation (It also
wins for international securities. There is an extensive array of help available, including live
seminars and an online community of strategy traders. Enhancements to the platform are usually
suggested by traders; the firm is very responsive to user requests.
Among the few shortcomings is the lack of a browser-based method for accessing your account.
Margin fees are in the middle of the pack, but other fees are reasonable.
Thinkorswim (www.thinkorswim.com), whose innovative Java-based software platform made it
the victor a year ago, is runner-up this time. It also earns 4 1/2 stars, though its point total trails
TradeStation's by a hair. Customers can log in via a Web-based platform as well as multiple
mobile devices, though President Tom Sosnoff says that 90% of users stick with the software.
The platform provides a wealth of tools along with lots of little jokes thrown in free of charge.
Sosnoff and his programming team have built in methods of trading from quotes, graphs, the
positions page -- pretty much any place in the program that displays pricing or volatility data.
The ability to perform options strategy backtesting was recently added, allowing users to test
strategies based on five years of historical data. Thinkorswim will add graphing to this tool in the
spring.
Table: How the Brokers Stack Up
Customer service is outstanding at thinkorswim. E-mail responses are customized, and there is
no wait time when you call in. Commissions are very reasonable, but if you don't like them, you
can request a look at another broker's schedule. There are loads of ways to get educated about
trading, especially options trading, both on the thinkorswim Website and by signing up for free
live seminars.
Thinkorswim may appeal to a wider audience than TradeStation for its good humor and services.
Both are technological marvels that are probably too much for those who don't want all the realtime bells and customizable whistles.
Here are the pros and cons of the rest of our four star and above firms. Interestingly, four of them
are Web-based, one software-based and the others offer both Websites and software, a sign of the
substantial progress browsers have made.
Interactive Brokers (www.interactivebrokers.com).
Pros: It not only charges the lowest commissions on stocks and options, but also has the lowest
margin fees and pays near the top for cash (over $10,000). IB has worked hard to address one of
our criticisms, which is the steep learning curve for using its TradersWorkStation platform, by
introducing an Order Wizard. The Order Wizard coaches the user through placing a trade, and
also shows the 40 order types available with the platform and why you would use them.

The platform has a new look and feel, and is more easily customized than previous versions. A
new feature we like is the Contract & Securities Search, accessible from the IB Website. It
displays all the futures contracts a user can trade, with an explanation of what they are and why
you might want to add them. IB has even created account statements that allow investors to slice
and dice their trading activity along numerous parameters to suit their own information needs.
For the international trader, IB recently added Mexico and Spain to its list of overseas exchanges.
The firm will enable mutual fund and government bond trading in the near future, filling the last
couple of holes in its menu.
Cons: Customer service remains an issue, despite the efforts to improve. This is a platform for
traders who don't need much hand-holding.
OptionsXpress (www.optionsxpress.com)
Pros: This is a versatile Website with loads of tools and ways to track your portfolio. Easy to use,
excellent education resources, and a wide array of items to trade, including futures. Options
spreads are now priced by total contracts in the spread, not as individual trades, which can save
customers money. For example, if you trade a spread with three legs totaling, for example, 12
contracts, most brokers would charge you for three separate transactions. If your broker charged
$14.95 plus $1 per contract, you'd end up paying $56.85, but under OptionsXpress' new pricing,
you'd pay just $26.95. In addition, margin rates are on the low end of the scale.
Cons: A high percentage of orders at OptionsXpress net the firm a payment from an exchange
that pays for order flow, which can be a sign you're not getting the best deal (the firm insists
customers aren't affected). Also, interest paid on cash in accounts is about half what most brokers
pay.
Fidelity Investments (www.fidelity.com)
Pros: The Fidelity site is very deep, and rich with planning and search tools. That's why it ranked
highest for buy and hold investors: Customer service is good, long-range planning aids are
excellent, moving money around is easy and educational programs are solid. Customers can use
the Website, or if they qualify, download Active Trader Pro and its add-ons, Option Trader Pro
and Wealth-Lab Pro. The Active Trader Pro package is appealing to frequent traders who don't
want the complexity of TradeStation. Wealth-Lab Pro allows customers to test trading systems
against historical data; you can get an introduction to backtesting for free at Fidelity.com.
Fidelity's stock screening tool lets users specify a particular technical pattern or event, and allows
the integration of technical and fundamental data as well as research provider ratings. It's very
flexible and allows users to find new trading ideas. In addition, the road warrior has plenty of
ways to access data and place trades.
Cons: Costs are on the high side.
TradeKing (www.tradeking.com)

Pros: A relative newcomer to the online brokerage business, TradeKing's site features new, slick
tools that focus on finding and executing options strategies. A recent addition is Scivantage's
Maxit, an automated cost-basis and portfolio-tax reporting system that not only tracks capital
gains, but helps make better tax-related trading decisions. (Maxit does a better job with options
transactions than its competitor GainsKeeper) The firm is extremely responsive to its customers,
conversing with them in the TradeKing community as well as via live chat and phone support.
The community features are embedded in the trading site, including the ability to calculate return
on investment over various time periods. Costs are low.
Cons: Some features such as the return on investment calculation can only be used via the
TradeKing Community, so they're unavailable if you don't want to share your trading activity
with the rest of the world.
MB Trading (www.mbtrading.com)
Pros: The firm's software platform, MBT Navigator, offers top-notch execution and order
management that can be integrated with a number of charting and analysis packages, such as
eSignal and QCharts. Orders are routed so that more than 50% receive price improvement. One
very cool new feature is the ability to change a previously entered order by dragging and
dropping it on the Market Depth display. Your order is highlighted so you can see it working
after you've entered it; to change the price of a limit order, or to convert it to a market order, is as
simple as clicking on it and dropping it somewhere else on the screen. Most other brokers require
you to cancel the original order and fill out another ticket, which can cost you profits in a fastmoving market. Multiple accounts can be grouped with the Managed Account Trading tool.
Foreign exchange trading has also been enhanced. The firm has low fees and offers a reasonable
return on cash.
Cons: Analysis and charting are not built in so you must use a third-party program. There's also
no mobile access.
OptionsHouse (www.optionshouse.com)
Pros: Having opened to the public in January 2007, this new site is attracting active, experienced
options traders with its powerful, yet easy to use, Website. Commissions are flat-fee; you can
trade as many contracts as you'd like for $9.95, or as many shares of stock as you'd like for
$4.95, whether you place the trade online or via a live broker regardless of how many trades you
make in a year. Margin fees are low, making them a good value. You can access an order ticket
from any page on the site and it's simple to close an existing holding when viewing your
positions. The trade ticket is filled with all the information necessary to close the position,
whether it's long or short. OptionsHouse also offers Maxit for tax reporting. Excellent customer
service, and high-quality options education.
Cons: Limited bond offerings; no mobile access.
Muriel Siebert & Co. (www.siebertnet.com)

Pros: Very recently updated site that allows extensive customization and research that's tightly
integrated with the customer's portfolio and watch lists. The new site includes complex orders,
such as one-triggers-two and one-cancels-another. Wherever a symbol appears, you can access a
wealth of third-party research from providers such as Multex, Standard & Poor's, Zack's,
Baseline, and Risk Grades. The updated Options Wizard helps enter a complex option order, and
calculates your profit and loss as you enter the order. The position page can be configured to
show an overview, or you can drill all the way down to individual tax lots if you've made
multiple purchases of the same security. This is a customer-oriented firm that goes out of its way
to personalize pricing for large traders, or to handle large orders.
Cons: Options price structure is still very archaic because it's based on the total value of the
transaction rather than on individual contracts. And it's expensive.

E*Trade (www.etrade.com)
Pros: A huge effort clearly has been made over the last year to upgrade customization and
improve the trading experience. The Global Trading Platform provides U.S.-based retail
investors the ability to trade stocks online in six foreign markets, in each market's local currency,
with real-time quotes for Canada, France, Germany, Hong Kong, Japan and the U.K., along with
free company-specific research for stocks that trade on those exchanges. The updated Online
Research Center keeps track of the last 10 ticker symbols you viewed, and presents several ways
to get new trading ideas. E*Trade Pro, the software offering, includes free access to NASDAQ's
TotalView and OpenView data, allowing customers to see every market maker in a given stock.

(This service is available through some other brokers for a fee.) Pro's new Options Analytics
suite gives options traders more data, and more ways to search for appropriate strategies.
Cons: The firm's mortgage business was hit hard by the subprime mess, hurting its financial
performance and raising questions about whether it would eventually be sold. The company has
denied any interest in selling. Customer service, while much improved this year, continues to be
an issue.
Terra Nova Financial (www.tnfg.com)
Pros: Aiming at the peripatetic trader, Terra Nova enhanced its proprietary trading platform,
DirectPro, which it picked up in its takeover of RushTrade. Option chains are presented in a
concise and organized display with calls and puts for every expiration month and strike price, all
in real time. Clicking on an option chain automatically loads it into the integrated order book,
which allows the trader to choose a preferred exchange. The Trade Strategy feature offers users a
variety of ways to automate their exits. They are then held on Terra Nova's server so the trades
will execute even if you're not logged in. The layouts for DirectPro are easily customized, and
the specifications are stored on Terra Nova's servers so you can switch computers and still access
your most recent screen setup. The firm will soon add tools on its Website that allow investors to
search for mutual funds. Traders can also use the RealTick trading platform for an additional fee
though the firm's focus is on its proprietary platform.
Cons: Few tools for the long-term trader. Service is skewed towards the high end -- a plus for the
semi-professional, but not so helpful to the less frequent trader.
ChoiceTrade (www.choicetrade.com)
Pros: A boutique firm that prides itself on offering top-notch customer service, ChoiceTrade
gives clients three options for placing trades. The Website is clean and simple, plus there are two
software programs available. The high-end program, ChoiceTrade Select, includes Option
Vision, an intuitive tool for options traders. The firm also added a one-to-one mentoring program
for the serious investor. Many of the changes were internal, designed to keep up with the
explosion in quotes and data messages, enhancing the ability to perform during peak market
times. The Select platform's backbone has regulatory requirements built in as well; this is an area
that other brokers may struggle with over the next year.
Cons: Fee for real-time quotes unless customer hits trade threshold. Fixed-income choices are
limited.
Charles Schwab (www.schwab.com)
Pros: Customers of all sizes and trading patterns can find useful tools here. The Client Concierge
helps get new traders up and running quickly on Schwab's platforms with a free, one-hour
private consultation to answer questions and smooth the process. For active traders, Schwab
integrated its CyberTrader platform, which had required a separate account, into the total Schwab
offering in December 2007. Schwab's Quotes and Research section allows users to search

through industries and stocks using both technical and fundamental data. There are now 17
different news sources available to customers; clicking on a ticker symbol brings up a huge array
of information on the firm in question. Schwab's Education menu displays live online workshops
as well as a schedule of in-branch workshops.
Cons: Schwab still seems to operate as though it was a collection of different companies that
overlap -- and occasionally confuse. Data is delayed for clients with under $100,000 in assets at
Schwab.
TD Ameritrade (www.tdameritrade.com)
Pros: Lots of tools, some inherited from the Waterhouse integration, with a focus on goodies for
the long-term investor. Newly launched long-term investor products include WealthRuler, which
helps clients design their retirement plan based on a variety of possibilities, such as market
conditions, income earned after retirement and partner contributions. TD Ameritrade beefed up
its portfolio planner; new tools include the ability to rebalance the portfolio quickly. The Bond
Wizard helps customers find CDs and other fixed-income investments, while the Bond Ladder
tool puts together a package of bonds that bring in a stream of income. Tools for more active
traders include the downloadable tool StrategyDesk, with backtesting and automated order entry,
and Options360, which helps options traders assess the impacts of various factors on option
performance.
Cons: Costs are on the high end, and quotes are delayed for most customers. The site had big
problems during the frantic trading on January 22; many customers were unable to get to their
accounts for several crucial hours. Interest on cash balances is very low.
Lightspeed Trading (www.lightspeedtrading.com)
Pros: Big focus on speed of execution and serving up accurate market data. The platform is
aimed at professional traders and hedge funds, so it doesn't have some of the creature comforts
that a retail application might contain. But what it delivers shows up very quickly. There's a
focus on charting, real-time news and multiple methods of entering an order. Trading windows
are linked together to provide an obvious flow to the order process. Users can customize their
settings, and when they move to another computer, the settings follow them. Low fees for active
traders.
Cons: Complex options orders must be entered a single leg at a time, so spread trading is not
supported.
AB Watley (www.abwatley.com)
Pros: Both software-based (Ultimate Trader) and Web-based (Watley Trader) platforms focus on
speeding up transactions for active traders. The software platform can be extensively customized,
including hot keys for placing trades quickly. Both platforms offer real-time streaming quotes,
watch list, and options chains. You'll find real-time Level II screens and charts for Pink Sheet
stocks as well as the usual NYSE and NASDAQ suspects.

Cons: Limited price improvement and no contingent order capability. Additional fee for most
real-time news.
Scottrade (www.scottrade.com)
Pros: Stable company with a well-designed, easy-to-use Website and a direct access application
called Scottrade Elite. The various screeners (stocks and mutual funds) are new this year, and
make use of "smart text" analysis, which gives you results based on the chart or table you're
currently viewing. It's a slick feature, and one we enjoyed playing with. Customer education, on
topics ranging from using the platforms effectively to reading the markets, is a focus. Scottrade
has 20 podcasts on iTunes, and plans to add 22 more over the next year, plus live seminars at 342
branch locations. Company officials report that most of their new customers are generated by
referrals from existing clients, believing that happy customers bring in new ones.
Cons: Does not yet offer complex options trading, but promises its introduction later this year
through technology supplied by OptionsHouse. Realized gain and loss reporting is delayed.
Firstrade (www.firstrade.com)
Pros: Overhauled its Portfolio Page to better track gains and losses, including tax-lot accounting.
The firm launched an Online Security Center in 2007 that is designed to educate customers about
security issues; as part of that effort, customers get free anti-virus and anti-spyware software
from Trend Micro. Firstrade will add Gainskeeper's tax accounting in the next month. The site
has special appeal to Chinese investors, who can switch the language displayed with a mouse
click.
Cons: Level II quotes cost an additional $19.95 per month; other research offerings are on the
light side compared to other brokers at Firstrade's price point. Complex options strategies can
only be traded via live broker with a $20 surcharge.

Just2Trade.com (www.just2trade.com)
Pros: Very low fees and a growing array of trading tools. Margin fees are on the low end as well.
President Fuad Ahmed says he wants the site to be the JetBlue of online brokerage-clean, good
tools, low cost. Just2Trade added features such as simple options trading that were not available
for last year's review. "Express Buy" lets you enter market orders for up to eight stocks at a time
(though you can only get real time quotes for one at a time); will add "Express Sell" this quarter.
Free Level II quotes in new "Trading Desk" application, which opens in a separate screen.
Offering Maxit tax accounting software, launched March 14.
Cons: Can only trade stocks on "Trading Desk." To get a real-time quote when trading, you have
to hit an extra key and can only view one quote at a time. Complex options trading not yet
available, but planned for summer 2008.
Zecco (www.zecco.com)
Pros: Ten free trades per month (down from 40 last year) on a site that is showing continued
improvement. High account balance holders receive streaming quotes and charts, supplied by
QuoteStream for free (others pay $20/month). Improved customer service with a goal of being
friendly and engaged. Good options analytics with plans to improve those capabilities over the
next year. Extremely active community site designed to leverage collective wisdom to generate
trading ideas. Community members can view best performers' holdings and trading activity, join
groups and trade ideas.

Cons: QuoteStream application is not yet integrated with trading, so you have to flip back to the
Website to use the information. Lots of plans that are not yet realized.
AS GOOD AS MANY OF THESE services are at providing near-instantaneous online
information and transactions for traders, they will have to get better and more creative. The
swelling of the retirement ranks means online brokers will have to adjust their systems and
investment objectives. Emerging venues like the iPhone present new technical challenges, and
old annoyances like identity theft remain to be conquered. And the increasingly complicated
array of derivative securities must be explained to investors. As always, it's a matter of making
the trading world simpler -- with the click of a mouse.

Banks Fall Short in Online Services for Savvy Traders

WE EVALUATED THREE ONLINE BROKERAGES owned by banks this year. They didn't
do particularly well.
Banc of America Investment Services (a unit of Bank of America), WellsTrade (Wells Fargo) and
ShareBuilder (now part of ING Direct, which is backed by the huge Dutch bank ING) all
finished in the bottom five of our overall rankings, mainly because they don't offer much when it
comes to trading technology or product range.
One-stop financial shoppers who don't trade often might find these bank-based brokers
convenient and easy to use. But they're foregoing a lot of customized tools and analytics, not to
mention access to assets other than stocks or mutual funds. That doesn't seem like, well, a good
trade.
Despite widely publicized commission-free trading offers from Wells and BofA, neither their
sites nor ING's is appropriate for the frequent trader. Both Wells and BofA allow customers a
certain allotment of free trades, 100 a year for Wells, 30 a month for BofA, as long as they
deposit enough money in their brokerage and bank accounts. BofA's research is available only to
those who have more than $10,000 in their brokerage accounts, so free trades don't really do a lot
for those who are just starting out and need help (to get free trades, you must keep $25,000 at
BofA).
At Wells, you can transfer money from your checking account in and out of your brokerage
account, but there's a delay of up to a business day. ING's ShareBuilder says it takes a day to
credit your trading account when you transfer money from your ING Direct account. E*Trade,
which also combines a bank with a brokerage, makes the transfers on the same day, giving you
quicker access to your money.
The trading applications are not quite as sophisticated as other Web-based brokers. None of these
bank brokers gives you a real-time quote until you're in the process of placing an order. If you're
like me and use limit orders for most transactions, that miserly approach makes choosing the
right price much slower.

There's little of interest for options traders at these sites. They'll dish up some options chains, but
the display is basic and you can't trade complex options.
Creature comforts like pre-filled order tickets are not available. The sites have a late- 20thcentury feel to them, though Wells offers some customization and more in-depth portfolio
reporting.
Of the three, Wells' order execution gives traders the best prices. Neither ShareBuilder nor BofA
reports any price improvement via their traders, while Wells says that 24% of stock orders and
17% of options orders get price improvement. (Price improvement occurs when a firm offers
better than standard bid-ask terms.)
ShareBuilder was acquired by ING in November 2007. The site was redesigned in December,
with numerous orange accents, to reflect the Dutch bank's brand affiliation. It also reduced the
commission for real-time trades to $9.95 for stocks. Understandable in light of ING's emphasis
on high rates for short-term investment vehicles, it's more savings than trading oriented. It offers
customers the ability to trade dollar lots of shares on a regular basis. For instance, you can set up
a subscription that lets you buy, say, $100 worth of Google shares every month, though there's a
fee.
BofA and Wells also charge maintenance fees, which apply to accounts under a certain dollar
threshold if you don't have other relationships with the bank. There's little reason to have a
brokerage account separate from a banking relationship. If you want better trading tools, quality
executions and good reports, you should check out the firms that focus on those amenities.
-- TWC
WE RANKED OUR 23 BROKERS USING THE FOLLOWING MEASURES:
Trade Experience: Working with a live account, we looked for a real-time quote and executed
equity trades during market hours, making market buys and limit sales of a stock or exchangetraded fund. A real-time quote that is displayed without any additional user input (such as typing
the symbol into a separate box or hitting a "Quote" button) is preferred. Following the market
buy, we tracked the execution and portfolio reports. We looked for pre-filled order tickets when
selling a position, which eliminates possible errors during the closing process. After entering a
limit-sale order, we examined the open-order reports and looked at ways to check the progress of
the order, as well as ways to adjust the limit price or cancel the order. We also placed options
orders, using options' order-entry screens when available. As well, we examined mutual-fund,
bond, and (when available) futures, commodities and foreign-exchange order-entry screens.
An overall score of 5 in Trade Experience means the order entry-and-execution process flowed
easily from one step to the next, with real-time information available when needed.
Trading Technology: The availability of price-improvement strategies and smart-order routing
technology (which finds the best bid or offer) were necessary to earn a 5 in this category. Brokers
offering price improvement -- a sale above the bid price, a buy below the offer -- received a

fraction of a point depending on the portion of their transactions that benefited. Top marks were
earned by brokers who offered a wide array of order types, including conditional orders. The
ability to place a trade from a graph earned a fraction of a point. In addition, we looked for ways
to customize the trading experience, such as setting a default number of shares or contracts, to
speed order entry.
Usability: A 5 here means the site or program was easy to use and well-designed, didn't bog
down when moving from screen to screen, and can be tailored to the user's needs. Constant
availability of a trading ticket is key.
Range of Offerings: We awarded points for the diversity of investments that can be traded online,
with partial points given for those that can only be traded offline. Since all the brokers allow long
and short stock-trading, as well as single-leg options orders online, we don't award points for
those transactions. We asked brokers how many stocks, on average, their customers can sell
short, and awarded up to a half-point based on their answer. Complex options trading, and the
availability of mutual funds, bonds, futures, commodities and international trading were also
considered. A 5 in this category means you can execute all of these transactions online.
Research Amenities: This category measures the quality and accessibility of research, quotes and
charting. We looked for research, news and charting linked to a customer's portfolio and watch
lists; the quality of third-party research and its integration with the rest of the site; and the
availability of screeners, with special emphasis on options-strategy screeners. Brokers also won
points for offering real-time streaming quotes at no additional cost, powerful charting
capabilities, and Level II quotes.
Portfolio Analysis and Reports: The emphasis here is on clearly laid-out reports, updated in real
time, showing current balances, positions and margin status. Portfolio-analysis reports, with links
to news and research, as well as extensive transaction history, are most desirable. Tax reporting
also falls in this category.
Help and Customer Access: We sized up online help such as live-chat capability, user guides and
frequently-asked-question files. Offline help was assessed by making calls to customer service,
and weighing the brokers' reports of the average time spent on hold when a customer calls in. We
took a look at the education offerings, both online and live. The ability to visit a broker in person,
to access the account via a mobile device, to place touchtone trades or to place an order over the
phone were factors. This category also considers the rate a broker pays for a customer's cash.
Costs: We looked at commissions for stock and options trades and margin interest rates, giving
more points for lower costs. We scaled the points awarded so that the lowest costs in the group
earned the maximum number of points, with fractions given to the more expensive brokers.
Stock commissions are the biggest factor here, but options and mutual-fund transaction fees are
also considered. A 5 could be earned here by very low stock and mutual-fund commissions, less
than $8.00 for 10 options contracts, margin interest rates below 5.5% and no accountmaintenance fees.