Moreover, it does little to level the investment playing field. Instead, judging from a report released last week by the General Accounting Office, online brokerage firms are Wall Street's latest incarnation of the Wild Wild West. Government researchers collected data from 12 online firms in 1999. They were not identified, but they accounted for almost 90 percent of online trades. But even these problems pale compared with the difficulties investors have getting online trades executed at the best possible price.
Good execution is crucial to improving investors' profits.
Included in the report was a review by the Securities and Exchange Commission of 29 online brokerage firms. Last year, the S.E.C. found, more than half were not meeting their obligation to provide the best execution for their customers' trades. A major reason is that most online firms have other firms complete their customers' trades in exchange for payments of as much as 1 or 2 cents a share. These payments, big surprise, determine where a customer's order is sent, even if another market or trader is offering a better price. The regulators said the firms did not even try to assess the prices available from trading firms other than those that were paying them.