E*Trade to take on CommSec with fee cuts

Over the next few months, E*Trade is expected to open up several overseas sharemarkets, from Singapore to New York, to local investors.

This is the latest in upgrades to the online brokerage since ANZ paid $285 million two years ago, giving it full ownership of the business.

Accounts recently lodged by E*Trade show the market slowdown hurt revenue and earnings in the year to September 2009, with profit after tax coming in at $31 million.

E*Trade's managing director, Stuart Sayers, insists the brokerage has been paying its way for the bank, with customer growth coming in above expectations.

Although it does not break out specific figures, Mr Sayers said the broker had gained market share over the past 12 months, mostly as a result of tapping more of ANZ's traditional banking customers.

Volumes have returned with the rebound in the market, with year-on-year turnover up 30 per cent in the first few months of the year.

As regulatory and capital demands get tougher for stockbrokers, Mr Sayers said smaller brokers were using the online brokerage as their trading platform.

Demand is likely to gather pace with the introduction of tough new regulations requiring stockbrokers to substantially increase their holdings of liquid capital. Previously stockbrokers were only required to put $100,000 aside to back their trading operations. The securities regulator, the Australian Securities and Investments Commission, plans to increase this to $10 million over time.

"As the requirements on market participants start ratcheting up - not every broker can sustain that," Mr Sayers told BusinessDay.

There are believed to be about 2 million people with online trading accounts in Australia, and the figure is growing at double-digit rates. Commonwealth Bank's CommSec has more than 50 per cent of the market, and E*Trade accounts for more than 25 per cent.

Mr Sayers said customer growth had increased "sixfold" after ANZ overhauled its internet banking to allow banking customers to directly access their trading account, rather than going through a separate site.

"What that tells us is the link between the bank works ... [it is] by far and away the deepest channel for us," he said. Mr Sayers said online trading among retail investors was gaining momentum.

"It's basic stuff, more people going online. You're seeing it in internet banking and you'll see it in share trading."