InformationWeek
Defining The Business Value Of Technology
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January 22, 2001 |
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Redefining Business
Straight Talk:
Online Trading Grows Up
Ameritrade CIO looks toward services beyond trading
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ames Ditmore joined Ameritrade Inc. as CIO in March 1999, just as interest in online stock trading was increasing along with Nasdaq returns. Ditmore directed a $100 million IT investment, with the emphasis on improving scalability and reliability to manage the trading flood.
Now the company, along with the industry, is moving into another phase. More people are trading online, but a cooler stock market has slowed individual trading volume and competition has grown. Earlier this month, Ameritrade announced plans to lay off 9% of its workers. In addition to Internet rivals such as E-Trade, traditional financial-services businesses such as Merrill Lynch and Fidelity Investments have joined the online trading fray. Associate editor Christopher T. Heun spoke with Ditmore about IT's role in the changing industry.
InformationWeek: What changes is Ameritrade facing right now?
Ditmore: We've changed focus to basically become top in the industry, not just in terms of performance and reliability, but also in terms of features. What we can do is take that best performance, best execution engine, and then add all of the relevant core features that the online investor wants. We're never going to give out mortgages; we'll partner to provide additional financial services for customers. Our focus is to provide those tools and capabilities that the online investor wants. A good example would be that we'll be rolling out real-time balances shortly for everyone--not just for the most active traders or for our best customers.
InformationWeek: Are technologies coming down the pike that will change the way you do business?
Ditmore: Everyone talks about video and chat. The digital subscriber line rollout has been painful. If you get DSL, it takes about four trips to your home if you're lucky. Cable modems still have issues: It's a shared medium; it doesn't have nationwide coverage. The core issue is that broadband to the home is still a ways off, other than in selected areas. So it's going to be difficult to offer high-impact broadband services based on video. In fact, what you see instead is a move toward the lowest common denominator--don't put all the graphics on your site, make it so folks can download easily. Also, we haven't seen the full impact of wireless yet.
InformationWeek: Will many people use wireless devices to trade?
Ditmore: They are today. I believe it's less than 1% of our trades, but it's still one of the fastest-growing segments. The most active traders will want a high-speed connection so they can get all the information and all the tools. But the average person, if they can get a device that's connected to the Internet and is secure and very usable, they're going to use that rather than wait until they get home to their PC.
InformationWeek: How is wireless security?
Ditmore: It's actually more secure than your PC, because the phone has a serial number embedded in it. The PC doesn't have the serial number known to the network. The phone company knows a lot about you to produce that monthly bill. You know what cell phone a call is coming from.
InformationWeek: Is it fair to link online brokerages with day traders and not more with the long-term investor?
Ditmore: Online brokerage customers trade more than the average investor, but they tend to do a lot of research before they actually purchase the stock. What we're seeing is that typically when the stocks are taking a huge beating, our customers view that as a buying opportunity.
InformationWeek: Fidelity has a big ad campaign about online trading. Brokerages such as Merrill Lynch are offering more services. Are they a threat to your business?
Ditmore: With Merrill, I'm more than happy that they give their customers a CD and get them to check out this stuff online, because the customer will find out pretty quickly that this online stuff is pretty good. You can go and see all your statements, get them the day after the month's over rather than wait for them to come in the mail, print them out whenever you want. You can go in and basically take control of your own finances. You're investing and, by the way, you can do it a lot cheaper at Ameritrade. I think in the end we have a very good strategy that will enable us to win. Traditional brokers don't have the cost structure we have, so it puts us in a very different position.
Photo by Stan Barouh
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