Yet another low cost brokerage firm has entered the market. Actually, they\’ve been in the market for a number of years, and the word is just now getting out.

ex24 is another player in the discount brokerage game, and like others in the same business, offer low commission trades for stock traders. Naturally, there are a few things that set ex24 apart from their competition, as well as a few areas left for development.

The ATS Order Book is a feature I’ve not seen anywhere else. Effectively, the ex24 platform hosts its own sub-market if you will, allowing account holders to trade stocks between each other around the clock. It’s kind of a neat idea.

ex24 does clear their own trades, which eliminates the middleman, and hence some pass through costs to customers.

I had an opportunity to ask Chief Operating Officer, Anthony Link, a few questions about ex24:

1. Tell me a little history behind ex24 and the parent company, bidnask.

The initial idea was to create an electronic stock exchange where participants could trade directly between one another similar to what ebay does now for all other items. In pursuing this idea and working with regulators, it was decided that we would build an Alternative Trading System (ATS) as defined by SEC Regulation ATS. From there, efforts set forth to build the ex24 ATS and to form ex24, Inc. as a self-clearing broker/dealer. Today the ex24 ATS (ex24 Order Books), provides 24/7, Member to Member trading and instantaneous settlements.

This fall ex24 unveiled its US Markets Trading platform. The ex24 US Markets Trading platform provides Members with additional avenues for order entry. Members can enter traditional share based orders or real-time dollar-based orders. Trades conducted on the ex24 U.S. Markets Trading platform are routed to outside market centers and have traditional T+3 settlement.

bidnask.com, inc.(bidnask) is the parent company and sole shareholder of ex24, Inc. bidnask provides all of the technology behind ex24.

2. As you are aware, there seems to be an increase in the number of low cost brokerages coming into the market place. With so many different possibilities, what sets ex24 apart from the rest?

Innovation is really the characteristic that defines ex24. Yes, currently our breadth of products does not compare to the likes of Schwab or TDAmeritrade, but our products offer unique capabilities and additional products and services will come over time as we grow. Our core product/service is equity investing which began with our unique ATS; from there we have added traditional (share-based) equity investing and real-time Dollar based investing. As our products/services continue to grow, our focus will continue to better enable the investor through innovation, clarity, speed and reliability. Within the next 9 months expect to see another innovative product from ex24 that we believe will have broad appeal and be unique to ex24. This new product will continue to enhance the ease in which ex24 Members can invest.

ex24 offers its Members three great ways to invest in equities; they can be described as follow:

A. Members can enter traditional share based orders that are routed to outside market centers and have standard T+3 settlement.

B. Unique to ex24, Members can enter real-time dollar based orders. For example you can buy $1,000 of GOOG. The advantage here is that you can hold fractional shares (to six decimal places) and easily monitor your account by the change in dollar value. Further, unlike our competitors, our dollar based trading is real-time, so you are not constrained by a few set times, as done by a couple competitors. You can actually complete a dollar-based transaction in real time and do so when you think the price of the stock is advantageous. One more item to note, unlike at least one of our competitors, our commissions for purchases or sales are the same.

C. Unique to ex24 is the ex24 Order Book (ATS). The ex24 Order Book allows Members to trade odd lots of a select list of popular securities directly between one another 24/7 with instantaneous settlement. The Order Books are dynamic and provide the user with an interactive trading experience.

3. While not offering the lowest commissions on the block, your feeschedule is reasonable. How does ex24 make money off $4 trades?

We built ex24 as self-clearing broker/dealer from the ground up including a complete back office system. Since we do not utilize a legacy vender system for our back office and because we do not need to pay another clearing firm for every transaction or activity we have been able to greatly reduce the cost of processing a trade.

Furthermore, when Members trade on our ATS our technology allows us to clear and settle the transaction instantaneously. These instantly settled trades are on a book entry basis, thus eliminating or reducing settlement risk, outside settlement, clearing fees and Member service demand. Trades on the ex24 ATS provides a secure and efficient mechanism at a fraction of the cost. Our systems allow us to continually increase the amount of transactions processed without continuously decrementing the cost for additional business. ex24 then passes the savings along to our Members via inexpensive commissions.

When comparing overall cost, we believe that our $4 commission is one of the most reasonable. Yes, there are a few that offer a less per trade cost, but they usually come with a monthly subscription fee. In the case of Bank of America’s zero commission offer, it is looking to gain income from other services in which you may have $25,000 or more invested with them. Currently, ex24 is providing Commission Free investing until year-end for all share-based orders.

4. Your ATS Order Book is a novel idea. What was the logic behind allowing ex24 account holders to exchange shares with each other outside of the rest of the market?

Why not! Wouldn’t it be great if you could electronically buy or sell stock in an exchange like environment?

Today, the usual practice is to give your order to your broker and they take it from there. Our thought was to build a system/market center in which the individual investor actually gets to participate similar to on an exchange. If you will, a sort of ebay for stock, make investing easy for anyone and possibly fun. The ex24 system offers an avenue for investing that all can participate in, and where cost or barrier of entry are null.

5. Retirement savings is a hot topic of many younger people these days with the focus on saving more and spending less. Currently ex24 does not offer retirement (IRA) accounts. Any plans to do so in the future?

Yes, ex24 will offer retirement accounts in the future. I would estimate this at 9–15 months.

6. How about margin accounts?

Yes, we anticipate offering margin accounts in about 12-18 months.

7. Jim Lennane, the ex24 founder, has some extensive experience in the high tech world of computer programming geared toward the newspaper industry. What kind of experience does he bring to an online low cost brokerage?

Since taking his first company public on the Nasdaq to its eventual listing on the NYSE, Mr. Lennane has had a considerable interest in the markets and securities laws that support them. When SEC Regulation ATS came to fruition, his innovative thinking led to the creation of the ex24 Order Books (ATS). The ex24 Order Books seek to provide an accessible and interactive way for all to participate in the market without a lot of noise in the middle. Additionally, his life long career in technology, experience with system architecture, and fail over redundancy has been instrumental in the structure of our systems.

8. Back in April, 2004, ex24 launched its 24/7 trading platform after NASDAQ approval to serve the general public. How has the client base grown since then? What kind of value-added services has ex24 developed for its clients?

With minimal advertising we have grown fairly well. Generally, client growth has been at a slow and steady pace. However about 18 months ago we ran an ipod promotion that was quite successful. However, from that promotion we have since learned that we needed to increase our product base before focusing on attracting new Members (clients). In the last year and a half we have focused our efforts on building the ex24 U.S. Markets Trading platform. This trading platform offers both tradition share-based investing with standard T+3 settlement and real-time Dollar-Based investing. The benefits here are that Members are no longer restricted to a limited set of companies to invest in. Our unique real-time, dollar-based investing allows ex24 Members to buy dollar amounts ($10-$10,000) of any Exchange or Nasdaq Global Market listed issue anytime the market is open. Unlike our competitors who limit dollar based trading to a few specific times, ex24 Members enter dollar based trades in real time and further enjoy the same commission rates for sales as they do for purchases.

We have found our Members to be excited about our trading platform and loyal to the system. Two features we continuously have positive feedback on is our T+0 settlements for ATS transactions and our cost basis tracking. The T+0 settlements provide instantaneous settlement making proceeds immediately available for trading or withdrawal. Our cost basis tracking provides Members with the ability to sell a specific lot of stock based on FIFO, LIFO, or by lot preference. At years end ex24 also provides Members with a Schedule D-1 to assist with taxable gains/losses.

Plus! Until year-end, Members enjoy Zero commission on all share-based orders.

9. There is some skepticism abound among low cost brokerage clients that \”you get what you pay for.\” Four dollar trades are attractive, but how does the ex24 performance on trade execution and price stand up to more costly brokerages like TD Ameritrade, etc?

Just like any other broker/dealer, ex24 has the same responsibilities for the handling of customer orders and the same accountability of providing best execution for the orders it processes. So whether you pay $35, $15, or $10 per trade somewhere else, you will receive the same quality execution at ex24 for just $4 per trade. Additionally, until year-end all share-based orders are commission free.

In terms of performance, we are quite pleased with our results. On the ex24 ATS, transactions occur within a couple seconds and usually within fractions of a second. On the ex24 US Markets Trading platform, most trades complete and are reported back to your account within a couple seconds. ex24 Members can easily view details of trade processing performance from within their account.

10. Customer support is crucial in the brokerage business and can make or break a relationship with a client. How many people work at ex24 in a support role?

We couldn’t agree more regarding the importance of customer support. As ex24 is small organization with less than a dozen employees, there is a sense of all hands on deck with everything we do. This has actually helped us to not only build a solid system, but to also utilize technology to both support Member services and to minimize points of failure that create support demands. We will continue to add associates as business needs dictate.

11. Any time frame on when ex24 will be able to accommodate DRIPs?

Yes we will provide dividend reinvestment in the future but we do not have a set time frame as of yet. However, I do not anticipate it being a long ways off as we already account for fractional share ownership to the sixth decimal place.

12. Your company is open to taking on partners to provide content and services for ex24. Are you still looking for third party solutions to add to ex24?

Yes, we are always looking for better solutions and ways to bring value to our Members.

13. Currently ex24 is fairly lean in providing stock research and reports. Any plans to offer such utilities and resources in the future?

Currently we provide research information from MarketWatch and free S&P Stock Reports. Yes, additional resources and utilities will be added in the future. The content added will be based on both new products/services offered as well as feedback from our Members. Within 4-8 weeks we will be adding intra-day market data (Most Actives, Gainers/Losers, etc). Also, we will be expanding security search functionality giving Members ability to search by sector, industry, performance, analyst recommendations, etc.

14. Ex24 does not offer accounts to Canadian citizens. Do you plan on expanding your market into Canada in the near future?

Yes, the time frame here would be similar to IRA account at 9-15 months

15. What kinds of stocks can be bought and sold with ex24? (i.e. NASDAQ, NYSE, OCTBB, pink sheets…)

ex24 provides trading of NYSE, AMEX, and NASDAQ Global Market listed equities including Exchange Traded Funds. ex24 does not provide trading in OTCBB or Pink Sheet issues

…

Thank you, Mr. Link for taking the time to comment on ex24 and how it can serve the investment community.

Disclaimer: This post does not in any way constitute a recommendation to use ex24 as a brokerage. Not all brokerages are the same, and ex24 may not be suitable for all investors investment strategies.

Additional Resources
ex24 Website
ex24 Guest Test Drive
Investor Benefits
Fee Schedule
ex24 Order Book

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