University of Minnesota - UMN Executive Leadership Insights
Technology Bundling
Chapter

Technology Bundling

Innovation for Online Brokerage Services

Alexander Y. Yap and Wonhi Synn
In: Information Systems for Global Financial Markets. Emerging Developments and Effects
IGI Global, 2012

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Editorial Rating

6

Qualities

  • Insider's Take

Recommendation

Professors Alexander Y. Yap and Wonhi Synn of North Carolina’s Elon University analyzed online brokerage services the fun way: They opened accounts and started trading. They believed their in-the-trenches experience would enable them to assess e-trading services and recommend innovations these firms need to make to be competitive. They traded securities for a year, while exchanging views with other users and checking relevant message boards. The study starts on solid, informative ground when the researchers describe the e-brokers’ capabilities and value to clients, but ventures onto thin ice with limited data and anecdotal evidence about judging system breakdowns and their possible prevention. Readers should be aware that their research dates from 2004 to 2006, and the paper might have benefited from more rigorous editing. Still, getAbstract suggests the report to those interested in learning more about how e-trading works.

Summary

Online Brokers

Online brokerage services facilitate customers’ trading in corporate shares and other financial instruments via the Internet. E-brokerages use what is effectively an “online auction system” to bring buyers and sellers together to get the best possible prices.

But unlike consumer-goods markets such as eBay, online brokerage firms must connect to several different financial markets to assure that they provide their customers with access to a wide range of potential buyers and sellers. E-brokers also “bundle” services by providing related information, like real-time stock movements and prices, live news reports and market research.

Most online brokers share three common issues:

  1. Compliance with Securities and Exchange Commission investor rules – Electronic systems’ loopholes allow e-brokers to dodge US securities regulations, opening the door to legal action against the firms and their traders.
  2. Multiple “financial electronic markets” – The more markets an e-brokerage can access, the “smoother” its trades will be and the more likely its clients are to garner their desired prices. Customers whose e...

About the Authors

Alexander Y. Yap is an associate professor of information systems at Elon University in North Carolina, where Wonhi Synn is a finance professor. He is also the head of the finance department.

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