Who's on top in online trading?

Online stock trading is continuing to expand, but the players are shuffling positions, according to a Wall Street study released today.

In the first half of this year, 22 percent of all retail trades were conducted online, a figure that could jump to 27 percent by the end of 1998, the report by investment services firm Piper Jaffray showed. Trading online made up 17 percent of the overall market in 1997.

"Despite the market's latest dips, the online brokerages continue along their hyper-growth track, far outstripping the rest of the retail trading industry," Stephen Franco, senior electronic commerce research analyst, said in a statement. "And with the planned release of valuable new online trading features and the major marketing campaigns, we expect quarterly growth rates to remain in the 20 percent range for the next six months."

Although the numbers are significant, they don't differentiate traffic to the individual brokerages' sites from what is driven to them via portal sites and other less traditional financial channels. A study released last month by research firm Cyber Dialogue found that, of the more than 18 million Net users who manage their investments online, many are using America Online, Yahoo, and Quicken for Net financial services. It also found that AOL's financial area enjoys five times more traffic than the nearest "established" brokerage branded Web site.

For the online brokerages, Net trading accounts have increased significantly--the top ten brokerages now boast more than 4.9 million Net accounts among them, up 21 percent from last quarter, the study said. Trading activity was also up from last quarter, rising 18 percent to more than 14 million online trades.

But higher trading volume online doesn't come cheap. The study predicts that online brokerages will spend more than $500 million in the next year to advertise Net trading services, especially as banks and full-service brokerages increasingly offer such services online. However, the brokerages so far are not passing on those expenses--rates for trading remained mostly stable for the second quarter in a row.

Other findings from the study include the following:

First- and second-place Net trading firms Charles Schwab and E*Trade, respectively, lost market share in the quarter. Schwab dropped 2 percent; E*Trade lost 1 percent.

Rookie Suretrade reached top-ten status after only eight months of operation.

Fidelity regained the No. 3 spot from Waterhouse Securities.