Zecco Sounds Its Battle Cry

Times have never been more exciting in the brokerage world. But as the biggest companies in the industry jockey for position, smaller, lesser-known brokers have to find their own niches and bring customers innovations that make their trading easier.

Zapping the competition
That's the key concept behind today's move from online broker Zecco. With its new ZapTrade plug-in for the Firefox browser, it's easier than ever for Zecco customers to execute trades -- even when they're looking at a competitor's website.

When you visit certain publicly available research websites, such as Bloomberg, Yahoo! Finance, or the Motley Fool, you'll often read about particular stocks. The ZapTrade plugin put a small icon next to the ticker symbol of the primary stock you're researching. Click on the icon, and a window pops up to let you enter a trade order for your Zecco account -- without having to leave the research site or click on another tab or window.

In addition, Zecco plans to build partnerships with content providers to launch similar capabilities directly on their websites. If you visit a partner website, you don't need the ZapTrade plug-in to see Zecco's icons; they're placed there by the partner itself. If you don't have a Zecco account, clicking the icon invites you to learn more about the service and to open an account. The broker announced its first partnership with StockTwits today, but it expects more in the near future.

Fighting its own war
Zecco is best known for its initiative four years ago to offer commission-free trading on all stocks for customers with $25,000 or more in their accounts. Several other brokers, including the brokerage arms of Wells Fargo (NYSE: WFC  ) and Bank of America (NYSE: BAC  ) , sought to match that plan. Zecco later scaled back its free-trade offer, but it still gives customers 10 free trades per month, with a $4.50 commission applying to all trades after that.

Clearly, since its commission schedule is already far lower than most of its competitors, Zecco didn't have any more room to compete against Charles Schwab (NYSE: SCHW  ) and Fidelity on the basis of price alone. The main question, therefore, was where else to focus its efforts. Although Zecco offers its own stock research, trading tools, and even its own trading community, the choice it made reflects the fact that investors draw their information from a variety of sources. With this move, Zecco wants to make its presence known to investors, whichever web sites they use to do their research.

Pitting the competition against itself
Perhaps the most intriguing thing about Zecco's new model is the way it uses its competitors' resources against them. Just as you might shop at a local store to check something out before buying it more cheaply online, Zecco customers can use the research areas of competitors TD AMERITRADE (Nasdaq: AMTD  ) , Scottrade, and E*TRADE (Nasdaq: ETFC  ) to scope out stock ideas before buying them at lower commissions from Zecco.

Obviously, the plan has further to go. Zecco will have to expand the functionality of its ZapTrade plug-in beyond Firefox to other web browsers, in order to cover the most potential customers. Signing up high-quality partner websites will also help turn the focus of the initiative from existing customers to new prospects.

It's clear that ZapTrade will make placing stock orders easier for Zecco's customers. Whether that prompts investors to open new Zecco accounts remains to be seen. But as an answering shot in the broker price wars, the move shows how smaller industry players can compete against the big guns.

The Fool's Broker Center has the answers you need to find the broker that best fits you. Check it out today.

Fool contributor Dan Caplinger loves watching a good broker fight. He doesn't own shares of the companies mentioned in this article. Charles Schwab is a Motley Fool Stock Advisor selection. Try any of our Foolish newsletters today, free for 30 days. The Fool's disclosure policy fights the good fight every day.


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