Online Broker E*Trade Sets Up Shop In Israel

by Philip Morton, InvestorsOffshore.com

10 May 2001

Despite a worldwide downturn in online securities trading, leading US Internet broker E*Trade is persevering, launching earlier this week E*Trade Israel, a Hebrew and English language website that will allow Israelis to play US stock markets.

E*Trade believes Israel is one country where there is certainly room for expansion, in spite of similar offerings from Israel's banks and investment houses. Paul Menzies, E-Trade's managing director for Asia-Pacific and the Middle East, said this week: 'We certainly see Israel as an untapped market. We see an enormous opportunity to increase consumer participation in investing and trading in Israel.'

He added: 'The launch of E*Trade Israel is a natural progression of our global strategy and provides an exciting opportunity to establish the brand in the Middle East. Israel's retail investment community will benefit from the convenience and strength of E*Trade and we believe the success we've achieved throughout the world will be repeated in Israel.'

E*Trade Israel allows clients to trade in real-time and in shekels or dollars, on the New York Stock Exchange, Nasdaq, and the American Stock Exchange after opening an minimum account of NIS 5,000 with local brokerage firm the Central Securities Corp. E*Trade plans to add trading on the Tel Aviv Stock Exchange by the end of the year, but expects to do most of its business abroad.

Breaking into the Israeli market was not a hasty decision on the part of E*Trade. The company extensively researched the local market before investing U$6m in its Israeli site. According to figures released at the beginning of the year by market research firm Taylor Nelson Sofres, almost 20 percent of Israeli homes have Internet access while 20 per cent of of the 1.27m people connected to the Internet executed financial deals online last year.

Menzies commented: 'From the outside looking in, it was worth coming here for those sorts of reasons. There is a lot of technology savvy capability here. The fact is that what we are tending to discover is that the Trades per Active Account per Month [TAAM] are around one in the US, and in Europe probably not much more than that, but in the newer and smaller markets the TAAMs are significantly higher and we believe this will be proven in the Israeli market over time. We have done enough analysis to clearly know that Israel is well within our normal break-even parameter.'

On a worldwide basis, E*Trade's main rivals are Charles Schwab and Fidelity, both of which have not yet established a presence in Israel. Menzies said: 'It is very interesting to see that our competitors in this marketplace are all local, that there is no international company yet in this marketplace. I suspect that might give us a little bit of a head start.'

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