In the US, big brother is always watching

E-trading began on 11 Jul.’83 in the US and it has changed the way the world invests today. On-line investing has won the imagination of investors worldwide and 25% of the trades in the US are done via this route only. On-line trading is a big business in the US and the latest available data reveals that there are six million on-line investors with total assets of over US $ 200 bln. These figures are expected to touch 15 million on-line investors with an asset base of US $750 bln by the year 2002.

Morgan Stanley Dean Witter, DLJ Direct, Discover Fidelity and E-Trade are some of the prominent on-line brokerage and services firms The have captured a huge chunk of the market. A trading account can be opened for US $ 500 (with Jack White & Company ) to US $ 10000 (Internet trading Com, Wall Street Access). The figure depends mainly on the exposure that one is going to have. Commission rates for on-line trades are declining steadily. But one important issue is that e-trading encourages speculation and day trading as well. Says Dhiraj Agrawal of Sharekhan, “If you analyse the US trading pattern, there are not more than 20,000 super active day traders in the US. Whereas Charles Schwab, himself, has about 3.5 million customer accounts. I think the Internet is going to drive a large number of the investing population who are interested in genuine economic values rather than the small fraction of day traders.”

The Securities Exchange Commission (SEC) in the US is very much concerned about problems of investors engaging in day trading and its resultant implications, especially for market volatility, IPOs, Internet stocks, etc. like Sebi in India. It is concerned about the protection of the small investor. SEC has issued guidelines and established a separate web site containing various articles and links about e-trading. To protect investor interest and safeguard market integrity, SEC has created a special Cyberforce, a specially trained corps of 250 attorneys, accountants and analysts, to search for Internet fraud. Further, SEC’s enforcement division has launched a joint investigation panel with the FBI called “Operation InvestNet” to address fraudulent activities taking place over the Internet.