March 14, 1996
Schwab Brokerage to Permit
Securities Trading on the Web
By LAURIE J. FLYNNharles Schwab & Company, the nation's largest discount brokerage, will permit stock trading over the World Wide Web, beginning later this month, making it the first major securities broker to decide that the Internet is safe for transactions.
Initially, Schwab & Company will test the new service with customers of its E-Schwab electronic trading software for personal computers, which already permits securities transactions over Schwab's proprietary communications network.
Internet users, however, will not need the E-Schwab software, allowing them to access their accounts from anywhere they can access the Web. They will, however, have to use Version 1.2 or later of Netscape Communications' Navigator Browser to ensure secure transactions. Within a few months, the company said, it will make the service available to all its customers.
The new service will permit Schwab customers to trade stocks, get stock quotes and their check account balances. By summer, the company said, the service will be expanded to include mutual funds trading. Like E-Schwab customers, Internet customers will pay $39 per transaction of 1,000 shares or less.
Discount stock brokers like Schwab are particularly well suited to doing business over the Internet, analysts say, since there is no middleman involved in on-line services.
"It's a mass market model," said David Yockelson, vice president at the Meta Group, in Stamford, Conn. "It's not a Merrill Lynch model, where someone really wants advice and a warm, fuzzy feeling."
Schwab, whose headquarters are in San Francisco, has a reputation as an early user of new technologies, so it's not surprising that the company would be one of the first to make full use of the Internet. The company began offering PC-based trading in 1984, and in January it introduced E-Schwab.
Art Shaw, Schwab's senior vice president for electronic brokerage, said the company was confident that recent improvements in Internet security, particularly in Netscape's Internet server and client technologies, made it secure for transactions.
"Security has evolved quite a bit," Shaw said. "It's been under a great deal of scrutiny."
Still, Schwab appears to be hedging its bets. While customers will be able to buy and sell stocks via the Internet, they will not be permited to withdraw from their accounts or change an address. In addition, the company uses proprietary programming code to add another layer of security.
"This is fundamentally where we're comfortable today," Shaw said. "Over time, it will evolve."
While Schwab is the largest brokerage to date to permit trading on the Web, it is not the first. Aufhauser & Company began permitting investors to trade in individual stocks via its Wealth Web site two years ago. Rather than paying standard commissions on trades, Wealth Web users pay an annual fee of $800.
Likewise, the National Discount Brokers, Jack White & Company and Howe Barnes Investments Inc. allow individual investors to trade stocks over the home page of the PAWWS Financial Network, of Jersey City, N.J.
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PAWWS Financial Network.
Aufhauser & Company's Wealthweb.
Copyright 1996 The New York Times Company