The Report provides a number of statistics to put in context the growth and activities of on-line investors and firms. It also describes the various products and services currently offered on-line. Finally, the Report describes various trends in the industry, including: (a) the continued growth of on-line investing and the pressure it has put on traditional firms to offer on-line services; (b) how the growth of on-line brokerage will impact the services firms offer going forward; and (c ) how firms are developing technology to provide automated, but personalized, advice on-line. . | On-Line Brokerage Keeping Apace of Cyberspace EXECUTIVE SUMMARY I. INTRODUCTION Recent advances in information technology -- particularly the Internet -- are revolutionizing commerce. The securities industry most significantly on-line brokerage is at the forefront of this revolution. Research reports estimate that last year s 415 billion in online brokerage assets will grow by more than sevenfold to 3 trillion in 2003. The million on-line accounts open in 1997 have almost tripled to reach million by the second quarter of this year. On-line trading volumes have increased dramatically over the last several years. According to one analyst volume has increased from under 100 000 trades per day in the second quarter of 1996 to over half a million in the second quarter of 1999. The percentage of equity trades conducted on-line has grown to percent of all equity trades in the first quarter of 1999. On-line brokerage has significantly changed the dynamics of the marketplace causing one of the biggest shifts in individual investors relationships with their brokers since the invention of the telephone. For the first time ever investors can -- from the comfort of their own homes -- access a wealth of financial information on the same terms as market professionals including breaking news developments and market data. In addition on-line brokerage provides investors with tools to analyze this information such as research reports calculators and portfolio analyzers. Finally on-line brokerage enables investors to act quickly on this information. The pace of change and the strength of the securities markets generally has enabled investors to more directly participate in the securities markets. This confluence of events -- the development of technology affordable to investors and increased investor access -has raised a number of questions for the industry and the regulators. The questions addressed in this Report are 1. What will the brokerage industry look like in the
