BROTHERS COME UP AS WINNERS ON THEIR WEB STREET OF DREAMS: LONG, NERVOUS WAIT INSPIRES QUICK-TRADE SERVICE VIA INTERNET

In the early 1990s, Joseph J. and Avi Fox were trading stocks, bonds and options. When Dallas-based Hollywood Casino Corp. went public, the brothers put in an order for “a substantial number of shares” at $20.

The stock opened at about $18 and shot to $26. The Fox brothers waited an excruciating four hours before they received confirmation from their broker that their order had gone through.

That experience got Joseph Fox dreaming of a day when traders could have order confirmations in a matter of seconds, not hours.

Now, it seems his dream has come true.

Last July, the Fox brothers launched Web Street Securities Inc., an online brokerage based in Northbrook, Ill.

Since its debut, Web Street has received kudos from analysts and consumers for its real-time quotes, quick execution, life-like trading pit and web page design — as well as transaction confirmations that are seconds faster than the quick turnarounds offered by online competitors.

“This is a very new firm, but its impact on the industry has been enormous,” says Julio Gomez, founder of Boston-based Gomez Advisors Inc., a research company that specializes in online finance.

Gomez Advisors compiles a monthly ranking of online brokerages, based on price, ease of use, trade execution accuracy and breadth of financial services. Web Street first appeared on the scorecard at No. 2.

no-commission trades

Many newcomers have broken into the marketplace on price, Mr. Gomez says, and Web Street does offer competitive pricing: Orders of 1,000 shares or more of a Nasdaq-traded security are charged no commission, compared with $29.95 at competitor eSchwab, the web trading operation of discount broker Charles Schwab & Co.

But Web Street’s design has helped it steal customers from other brokerages and attract new online investors.

Particularly notable is the “trading pit” area, which allows an investor to check real-time bid prices, place trades and get confirmations without clicking on several different screens and waiting for them to download.

“This is the closest you can come to a true trading-floor environment,” Mr. Gomez says.

In addition, the 100-employee Web Street staffs its phone lines around the clock with licensed brokers, instead of customer service representatives. That enables clients to place trades whenever they need to, even if their Internet provider is overloaded or they are away from their computers.

Despite these advantages, Web Street is still a small player.

The company refuses to reveal revenues or client tallies, but analysts estimate that the firm is considerably smaller both in number of accounts and assets than mega-players such as eSchwab.

Other traditional brokerage giants are likely to offer online investing, especially since this business is growing exponentially. Cambridge, Mass.-based Forrester Research Inc. expects the number of online investors will jump to 14.4 million in 2002, compared with 3 million in 1997.

upgrades in works

To distinguish Web Street from its competition, Joseph Fox — who is chairman and president and handles day-to-day operations, while CEO Avi oversees marketing and other functions — plans to introduce more features.

Software upgrades will allow customers to monitor not only securities in Web Street accounts, but securities at other brokerages from the Web Street web site. Another upgrade will allow serious, active traders to execute trades instantly, without double-checking the order first. By yearend, Mr. Fox expects to be able to offer other financial services, such as mortgages and insurance.

“We really think this is Wall Street’s new frontier,” Mr. Fox says. “We want to build the brand so that it is an actual place customers can go for these services.”

Crain News Service