With college basketball on every television screen this month, it has become quite clear that two seconds can mean the difference between a winning team and one that will fade away into a distant memory. E*Trade Financial has gotten in on March Madness as well, with a two-second trade-execution time as the newest addition to its line-up.
The firm has recently decreased the time it takes to make a trade to two seconds from nine seconds.
"The fastest (competitor) time out there is now five seconds, and we're significantly undercutting that with our two seconds," explains Mike Curcio, executive vice president of E*Trade's retail brokerage. "Generally speaking, the faster the execution, the better, because it's going to be closest to the bid or offer."
Continuous focus groups and customer-advisery meetings have highlighted the interest in faster trading, says Curcio. "Speed and execution are always high up on the lists we get," he notes.
Joshua S. Levine, chief technology and administrative officer at E*Trade, credits increased operating efficiency for the improvement. Since moving to Linux servers, the open-source operating platform has enabled technology deflation and price performance. "The customer benefit is tremendous when you can get a lot of cheap computing working on a problem," he says.
Levine adds that speeding up the Web site's processing and fine-tuning the routing of trades has enabled the firm to increase trade speed realized on its operating platform.
The guaranteed two-second execution applies to all orders of up to 500 shares of the S&P 500 stock. All E*Trade customers are eligible, including those who trade using etrade.com, as well as active-trader products Power eTrade Pro, Power eTrade MarketTrader, Trading Desk, wireless devices and voice browsers. In addition, if the trade takes longer than the promised two seconds, the firm promises to pay the commission to the trader's next qualified stock trade.
Curcio also notes that the trades are time-stamped to the sub-second to ensure that the correct time is captured electronically.
Levine says that the increase of speed will not result in a decrease of service. "A typing test where you type 500 words per minute with 400 errors doesn't count," he explains. "We wouldn't offer an execution guarantee unless we were improving the quality at the same time. You don't have to give up anything when you go for speed."
Will the next step in the industry be a one-second trade? "It's a great goal. I'd love to do that," answers Levine. "From a technical side, everything is realistic. Everything is doable. But a lot of things have to grow and mature before anyone can really make that happen."