Nearly half of all retail trades were executed over the Internet by the end of 1999, according to Steve Franco, who follows the online brokerage industry for U.S. Bancorp Piper Jaffray in San Francisco. Online volume totaled 1.4 million trades a day in this year's first quarter, Mr. Franco estimates. That's ahead of his earlier expectations for those levels to be reached in 2002. And the rise has been like a rocket. Spending wads of money on advertising and dangling hefty lures, online brokers signed up nearly three million new accounts in the first quarter of 2000 alone, their largest quarterly jump.
Many analysts see the recent turmoil as a temporary blip on an otherwise clear radar screen.
Some have even raised their growth projections for the industry, expecting new accounts to more than make up for any slowdown in trading activity that might follow further market declines. How a long-term decline in the stock market would affect online investing is another question. The question is how much of an impact that will have on trading, because we haven't been through much of a bear market in the online industry. The industry isn't immune to market conditions, but growth in online accounts tends to be one of the least affected categories, Piper Jaffray's Mr. Franco said in a recent report. And, with all those tools available, many new investors are getting quite ambitious.