Active Trader Platforms Go Inclusive

by on Nov 08, 2012

active_trader_screenThis article first appeared in the Fall 2012 Issue of Consulting Insights.

Active traders are some of the most demanding brokerage customers. They require innovative tools to help them find trade opportunities and test strategies. They are also highly sensitive to any data feed or platform technology slowdowns and expect a reliable customer service team to troubleshoot any issues that may arise during the trading day. In the decade we’ve been closely tracking the active trader space, we’ve seen platforms evolve from crude-looking consoles with sluggish data feeds to more sophisticated systems jam-packed with functionality such as backtesting and program trading.

Today, though, active traders present a different challenge, as many are trading less or could be lured away by a competing brokerage. Firms are reacting with a new emphasis on usability on their active trader platforms in the hopes of expanding their appeal to a broader audience and encouraging more investors to trade.

Declining Active Trader Value

A commonly-tracked metric at brokerages is Daily Average Revenue Trades (DARTs), which impacts commission profits. A large percentage of these trades are generated by a relatively small number of frequent traders. It comes as no surprise then that investment firms go through great efforts to court this niche group of customers, typically through promotional offers, negotiated commissions well below published rates, dedicated service teams and access to powerful trading platforms that were once only available to professional traders.

Unfortunately, some leading online brokerage firms are reporting a steady year-over-year decline in DARTS. Active traders just aren’t trading at the volume they used to, a trend primarily attributed to stricter regulatory rules and uncertainty in the equities markets. Many of these traders were burned during the recent market meltdown and are now taking a more conservative approach with trading.

Competition poses an additional risk. Few customers maintain an exclusive relationship with a single brokerage firm. In a recent survey conducted by Corporate Insight, 50% of participants indicated that they hold active accounts at multiple brokerage firms. Flight risk is high, especially considering new account opening promotions, which include up to six months of commission-free trades from Charles Schwab and up to $600 in free trades from TradeStation.

New Emphasis on Usability

To compete for active traders, brokerage firms have begun to emphasize making their platforms easy to adopt and start trading. An active trader platform that is well-stocked with functionality but difficult to navigate may force new customers to turn right back to the familiarity of their old firm. While active trader platforms must distinguish themselves in the quality and power of their tools, when it comes to design, firms are trying not to deviate too much from how competitor platforms look and feel.

Active trader platforms also attempt to improve on both functionality and usability by incorporating familiar tools and resources from the customer website. StreetSmart Edge integrates stock research customarily reserved for the website; Edge users can also access ETF and stock screeners that were once only available on the client site. E*TRADE attempts to do the same via direct links from Power E*TRADE Pro to the private site.

Broadening the Base

The addition of private site data also fits with the brokerage strategy blurring the lines between active traders and other investors. Brokerages hope to make up for declining DARTS by using advanced tools to encourage trading by engaged investors, those who actively monitor and manage their accounts but tend not to trade in and out of positions intraday.

Even as active trader platforms import private site content, streaming real-time data and advanced feeds such as level II quotes and time and sales data are no longer reserved for active traders. At TD Ameritrade, Apex clients (5+ trades per month or over $100,000 account value) may get some data feed perks, but all investors are given access to the firm’s Trade Architect and thinkorswim platforms. Trade Architect may be a logical starting point for less seasoned traders to build up their trading knowledge and confidence before they graduate to the thinkorswim platform.

In February, E*TRADE introduced a new market dashboard called 360 to the private site. Designed much like an active trader platform, this one-page display consists of customizable modules that allow users to retrieve real-time streaming quotes, track the market, access news, view account information and trade.

Usability changes are also evident when it comes to trading. Over the past year, several firms’ active trader platforms have introduced options tools that allow even non-seasoned traders to easily start investing in options. For example, Charles Schwab’s recently launched StreetSmart Edge platform features an intuitive options trade ticket that automatically pairs appropriate options legs when a strategy is selected. The ticket also displays maximum gain/loss and breakeven figures.

Charles Schwab StreetSmart Edge


Active trader platforms are evolving, with their latest versions focusing on usability and ease of adoption. Firms recognize that they must continue providing advanced market data feeds and trading tools that the most advanced users require. At the same time, they have set about streamlining much of that functionality to make it more user-friendly for a broader audience. Either way, the motive is the same: to get clients off the sidelines and back in the market.