History of online trading

The history of online stock trading is a fascinating and revolutionary story about the power
of two worlds colliding and changing the industry of stock trading forever. The two that were
destined to meet? Public access internet service and electronic stock trading.
Its hard to remember it now, but prior to the combination of the two, investors used to call
(via land lines only at the time) a live broker (real person) to place a trade. Similarly, stock
brokers used to call investors and sell the purchase of a companys stock. Now with a few
keystrokes and a click, an investor can access information and initiate a stock trade with no
assistance or advice.

In the Beginning

As early as 1969, digital trading systems called electronic communications networks (ECNs)
were being used by brokerages to display in-house the bid and ask prices for stocks. By the
late 1980s, as the financial industry began to realize the potential of a public internet and
ownership of personal computers was growing in popularity, some of the leading brokerages
began to look more closely at ECNs. Several industrious brokerages either developed
software or bought companies that had developed software to link up stock traders with
current stock price information, thereby matching up buyers with sellers easily and
efficiently and with significant cost savings.

I remember the first time I saw a computer with its black screen background and green
type. It was 1981 at my local Radio Shack. But just one year later in 1982, the first full
service electronic consumer equity trading system for buying and selling stocks, mutual
funds and commodities using a PC came online. It was called NAICO-NET and it was offered
by a company called North American Holding Corp. located in East Hartford, CT. The system
was ANSI based, meaning it was terminal based but IBM PCs could connect to it via a
simple application and it connected traders from all over the world. Trades were sent
directly to Pershing Corp. (Donaldson Lufkin & Jenrette) for high speed clearing and the
trader subscription base quickly rose to over 5,000. And the rest, as they say, is history
the history of online stock trading.

Over the next 10 years, the history of online stock trading developed slowly, temporarily
crippled by the stock market crash of 1987, a recession and the Gulf War. Additionally, the
costs were still generally high for online access for retail stock traders. It was in the 1990s
that things shifted and online stock trading really took off.

Trade*Plus was another pioneering company in the history of online stock trading and in
1985 offered some of the very first retail trading platforms on America Online and
Compuserve. Trade*Plus continued to offer its services to brokerages, but in 1991 one of
the founders of Trade*Plus, William Porter, created a new subsidiary company called
E*Trade Securities, Inc.

For retail traders, the coming together of better accessibility to information, the ease of an
electronic trade and decreased cost to process a trade enhanced the popularity of online
stock trading and it began to take off. By the mid-1990s, more than 20 percent of the
nations population was investing in stock, compared with less than 5 percent the decade
before. To illustrate the impact this had on E*Trades bottom line, its revenues increased
from $850,000 in 1992 to $11 million in 1994 and was rated as the fastest growing
company in America that year. The rush to become an online stock trading broker was on!

Another well-known company, TD Ameritrade, originally started out as a company called

First Omaha Securities and in 1995 the company acquired K. Aufhauser & Company, Inc.
and its WealthWeb, which had begun offering online stock trading in August 1994. The
company that was to eventually become TD Ameritrade continued to merge and acquire
other companies, quickly becoming one of the largest online brokerages.

A conversation about the history of online stock trading must include the fact that Charles
Schwab, for a long time, had been cornering a huge portion of the financial industrys
market share through branch offices and discount fees. They continued to build market
share at a strong pace all through the 1990s. Charles Schwab was only slightly late to the
online stock trading party and became another strong leader as an online stock trading
provider in the late 1990s, combining their market share with strong promotional activity.
They started by providing a web presence in 1995 and at the time had $181.7 billion in total
client assets. The very next year their online stock trading went live and in 1996, they
ended the year with $253 billion in total client assets. By the next year, 1997, Charles
Schwab registered its one millionth online account, reached total client assets of $437
billion and ranked as the top online broker in the U.S.

Joining the party, Scottrade.com launched in 1996 and turned the heat up in 1998 with
online trades beginning with a low commission rate of $7 per trade.

The Frenzy!

The ease of online trading for the retail trader and discounted commission fees made online
trading more attractive to more people. An advisory group reported that the number of
online brokerages jumped from 12 in 1994 to more than 140 by the end of 2000.

Additionally, the ease and popularity of online stock trading opened up a whole new career
in the financial industry day traders to whom many analysts attribute the market volatility
of the late 1990s.

This steady and continual influx of cash into the stock exchanges during the 1990s helped to
create a very strong bull run as you can see in the monthly chart (1988 through 2001) of
the Dow Jones Industrial Average ($INDU) below:
As impressive as the upward climb in value was, look also at the incredible rise in volume.
This chart helps to tell the story of the history of online stock trading. The frenzy that easy
access and a bull market inspired only helped to perpetuate the upward run that eventually
wouldnt be able to sustain itself with the same strength.

A larger aspect of the history of online stock trading is the way that stock trading has
changed from proprietary, broker-driven trading to open-access, consumer-driven trading.
That shift has left some potholes in individual traders ability to be successful with trading.
We, as retail investors have better access but many have ineffective investment
knowledge. Many consumers need to match up greater investment knowledge with the
incredible access to be truly successful investors.

The Future of Online Stock Trading

As for the future of online stock trading, it will continue to evolve in several areas. Expect to
see more development of streamlined software applications for trading. For example, many
brokerages now offer trading applications (apps.) for cell phones that have mobile web
browser capabilities. The mobile trading services provide basically the same services as
those that investors access now using their personal computers. Look for brokerages to
continue to broaden stock trading capabilities for retail traders.

The future also holds greater access to many different investing products and expanding
markets. For example, continued access to a wide range of investing vehicles like mutual
funds, ETFs, options, forex as well as an expanding group of products and greater access to
trading in global markets.

And lastly, because the history of online stock trading has developed so quickly, a stronger,
knowledge-based approach for investors that expands beyond the traditional buy and hold
strategy or day trading is vital. Most online investment brokerages are beginning to offer
enhanced educational programs because they understand that the more successful stock
trading is for investors, the better opportunity online brokerages have to increase their
business.
 History
Karvy corporate was established in the year 1983 and is now headed by Mr. C Parthasarathy as
Chairman. The group has more than 16,000 employees, spanning 900 offices in about 400 cities
and towns. In the mid-1990s, Karvy forayed into stockbroking and advisory businesses. Later, in
the early 2000s, Karvy Corporate ventured into commodity trading. With the introduction of
currency trading, Karvy corporate is also in the business of Forex trading. In September 2008,
the group launched an online trading and investment portal offering an extensive range of
financial products and solutions across different classes.