With online brokerage firms scrambling to retain their most profitable customers as market activity is picking up, Ameritrade is rolling out a new graphical-user-interface for active traders that will help them visualize liquidity in the stock market and place trades more quickly.
This week, all active traders in Ameritrade's Apex program will have access to QuoteScope - an interface that uses Nasdaq Level II data to display liquidity at different price points and by market maker. The interface can also be used to view listed stocks, the firm says.
For the first three months, QuoteScope is being rolled out exclusively to Ameritrade's active traders, but if there is positive feedback, the product will be made available to all of the firm's customers that subscribe to the Nasdaq Level II data feed.
"Liquidity is what drives prices in the stock market," says Cassius Almeida, senior product manager at Ameritrade, who had the idea for the patent-pending product during a fishing trip two years ago. "It's buying and selling interest that makes prices go up and down," he adds. "If you look at Level II today, it doesn't have any visual representation of liquidity," he says.
One of the key differences from traditional Level II displays is a circular interface where the stock symbol and the price are centralized. "It allows users to reach much faster to market conditions. You can focus on the center of the interface and pick up changes in liquidity with your peripheral vision," says Almeida.QuoteScope shows the aggregate share size with dynamic bands that can expand or compress depending on how liquidity changes within each security at each price point, or by market-maker participant, he says. Other novel features include proprietary liquidity indicators and the ability to take action with one-click trading.
"There's nothing closely resembling it on the market from what I can tell and research I've done," says Adam Josephson, research associate in the securities and investment practice at Celent Communications. "And the ability to enter an order with one click is certainly something that cannot be done elsewhere," adds Josephson, who co-authored a recent report on active-trader programs.
But while some firms, such as E*Trade, have diversified into banking or Schwab and E*Trade, which have ventured into market making, Ameritrade remains dedicated to the self-directed investor. "They're constantly looking to upgrade the technology they provide given how reliant they are on this market. They, more so than their competitors, are reliant on these active traders to keep their business running profitably," says Josephson. He maintains that Ameritrade has superior technology to the other online brokers it competes against. He says those include E*Trade, Charles Schwab, Scottrade and Brown & Company. "The technology they offer by way of the Streamer (from Ameritrade's $1.3 billion September 2002 acquisition of Datek) and Apex Client Services team (24-hours a day, seven days week) were competitive if not superior to all of their online brokerage competitors," Josephson claims.
On top of that, Ameritrade offers proprietary order routing to electronic communications networks and market makers, which many of its competitors do not offer, Josephson notes.
In terms of trading, QuoteScope offers active traders four ways to take action. First, there are "buy and sell icons on a toolbar that you can use for placing market orders," say Almeida. Second, there's a split-buy and split-sell button to place limit orders at or near the midpoint of the national best bid and offer (NBBO). "In fast moving markets, you'll have a much better opportunity to get an execution than either on the bid or asked side of the market," says Almeida. Users also may opt to click on a price band and have the order sent right away without reviewing a confirmation screen. "That's as fast an order placement process" as is possible," says Almeida, who cautions this is one of the risks.
"Given the frequency these investors trade, they'll know full well what the benefits and drawbacks are of that mechanism," he adds. "Even if the confirmation were to come up, the fact that they can see this second by second liquidity is unmatched by anything else out there at online brokerage firms. That's for certain." Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio