We were pretty hard on Zecco when it launched a little more than a year ago. Their zero commission brokerage service raised a number of red flags. In particular, we were worried that they would attract only the very low end of the market.
Despite our criticism, the company soldiered on. They’ve built out their trading platform to to get the heavy day traders to use them, and launched a social site called Zeccoshare that allow like-minded investors to share opinions on stocks (which in turn drives transactions). They say they’ll soon begin to harness the collective intelligence of those users to get even more data about stock to traders. There are others experimenting in this space as well.
Today the company is announcing a $25 million round of financing, adding to the $10 million they previously raised. They’re also filling out their executive team quite nicely. Who knows, maybe, just this once, we were wrong when we called them a loser.
We’ll just put Etrade into the deadpool instead.
I had a really rough time trying to open an account with them a few months back. I jumped through hoops, faxing in various documents and passports, and it didn’t help that I currently live abroad. Each of my inquiries would take days to get a response. During the weeks that I tried to open an account, they closed down their toll-free number and disabled the user-feedback forum, two indicators to me that they weren’t doing so well (and at the time I thought for good reason).
Eventually I just gave up on the process, figuring that Zecco wouldn’t last much longer.
That’s too bad. My experience was super easy - all online, digital sig, etc. (I’m in the US, though). It’s tough to beat free trades…seems like ZeccoShare is growing nicely, too. Definitely some interesting + informative conversation going on there.
great team and execution as you might hear on morten and martin’s blogs
don’t forget that when zecco launched they forced b of a to jump in with a me too - they did/are changing the game!
Too bad they have a shitty user interface.
Well … I just tried to open an account and could not. Drop downs do not work, neither does the validation on the fields, etc. Too bad … I was ready to open another trading account to complement my other account.
Nick; because they got some extra funding does not mean that they have or will make it. It just means that they did a good enough job selling the company to investors. They would not be the first ones to be able to sell empty opportunities to savvy investors. It does not speak poorly of the investors, but highly of the person doing the selling. Besides, it is what investors do … take risks!!
i have been using zecco, overall im happy with it (though not with my portfolio as such
)
the settlement of trade seems to take 1-2 days more than ETrade (which I was using primarily before), but I can think free trade beats it, esp for frequent trading.
the website sucks though. crappy UI.
These guys have a serious problem with their business model, however. They plan to make money exactly the same way Etrade does (see: http://www.wikinvest.com/etrade for details). The “Zero Commission Brokerage” relies on your ability to make money in other ways — namely, by sweeping customer cash into bank deposit accounts, where you can lend this cash out to finance mortgages and other high-yielding loans, thereby making interest on the “spread” of customer cash.
This accounted for 60% of Etrade’s quarterly revenues — the problem is that it only works when the mortgage game is a big, lucrative market for lenders. That’s sort of not so true anymore (hence Etrade’s almost-bankruptcy), and calls into question whether Zecco will be able to make money purely off the spread.
Not sure how folks invest on an idea purely based on pricing. There are tons of competition to these guys.
From the feedback on the e*trade posting, I doubt they will be joining the deadpool anytime soon… even if that one guy does take 5M out of his e*trade account. It’s still a drop in the bucket and will smooth over the next couple of weeks after this mob mentality has been educated. Maybe e*trade will also evolve into a no-fee brokerage?
Jon
I use zecco. Overall I am satisfied. I don’t like that they reduced the free trades from 40 to 10 for new accounts, and eliminated any free trades for accounts less than $2500. This doesn’t jive with their mission, and the very name zecco (stands for ZEro Commission). However, other than slow customer service and a couple times the site was down, it has been pretty good. Opening and funding an account is easy, though it can take a couple days for ACH transfer. Also, they almost always close my transaction at a price slightly above my ask or below my bid. I feel other brokerage firms probably pocket the difference, though I am not sure if this is the case of course. Anyhow if you want to join Zecco feel free to help me out as a poor student and give me a $50 bonus through the following link: http://friends.zecco.com/r/ec5e56a2e3bc102a8555
Hi Nick, we read techcrunch religiously and are honored to be featured.
I’d like to address one of your reader’s comments regarding the Zecco Trading business model. Brokerages make most of their money off of interest and commission income. There are a lot of smaller revenue streams, but these are the biggest and Zecco Trading is no different. Think of it this way. Some brokerage customers leave some cash in their accounts. Others trade on margin. A typical brokerage will lend a portion of that cash to the margin traders (secured against the equity in their account) and books the difference (i.e., net interest = margin rate – rate paid on cash). This has been a tried and true business model for decades, and there are very stringent rules in place that ensure brokerages and their customers are protected.
I can’t really speak for E*TRADE other than my understanding is that they have a slightly different model where a portion of their customers’ cash is swept onto the bank balance sheet, where it could be invested in other financial instruments like CDOs or mortgage backed securities. The important thing to note here is that Zecco Trading doesn’t engage in ANY banking operations and has no exposure whatsoever to the losses other financial services companies are seeing due to the mortgage collapse.
As for the commission income, Zecco Trading makes revenue from options trading plus the customers that execute more than 10 trades a month. It’s not rocket science making money in this business. We just think most of the other brokerages are taking too big a slice of the pie from their customers.
Additionally, I can shed some light on the signup process. Since May, most customers can sign up online without the need for any physical paperwork (with a few exceptions including foreign applicants and IRA applicants). So mostly the process runs very smoothly. I’m not sure what happened with Victor or Fabian – they should call customer service who will get everything straightened out for them.
Hope that helps.
Gabriel Dalporto
Zecco Holdings, Inc
http://www.zecco.com
How about your website being down all day on Monday 15th of September 2008? I just opened a account 4 days ago, and did a ach deposit, have not made one trade and am looking to close it already. For a company to be down on one of the worst days of the market in years. All I can say is wow, action speaks louder than words.
here is what zecco need to be the best
1. realtime streaming quotes and account balances, number of trades
2. gainskeeper as announced only by small fee to investers who want this service
3. MOO and MOC “market on open” and “market on close” to compete with thinkorswim, as they auto trading with tons of services that zecco lacks
here is the list where thinkorswim has its partners
RED Option
10PercentPerMonth
Anacott Investments
Ascent Option Spreads
Big Trends
Cash Flow Avenue
CondorOptions
Crowder Investments
Daily Profit Signals
Day Trade Profits
DayTradeTeam
Day Trading Stock Picks
Disciplined QQQ Trading
Dow Signals
EOptionsProfits
ETFsystem
Easy Options System
Fast Revenue Picks
GLINSER.com
INVESTfit
Income Spread Trader
Index Option Trader
Index Trading System
International Stock Report
Investors Observer
MT Options
Market Neutral Options
NDAQ System
NOS Uncovered Options
OTS Options Signals
Option Alarm
OptionPartners
Option Principal
OptionSmart
Peak Investing
Pick of the Month
Profitable-Trading-Tips.com
Small Cap Trendz
Split Master
SpreadTrader
Stock Advisor Group
StockMarketCashMachine
Swing Profit System
Taking Profits
Terrys Tips
The Agile Trader
TheMiniAnalyst
The Options Report
TurnerTrends
Wall Street Teachers
Winner Stock Picks
WiseOptions
4. before and after hours trading so small invsters do not stay behind and zecco can compete with rest of the brokers that all have this functionality
implemenation of these steps will sure cost zecco but eventualy this will become zecco’s competitive advantage and I am cent percent sure no other broker can come even close to zecco
finaly thanks for the author to have accepted the reality
long live zecco
Very very slow in posting your funds in and very very slow in letting you transfer funds out. They will hold anything above $10,000 for 5 business days or longer if you don’t complain. They will try to keep your margin balance as long as they can even when it has exceeded the days since they held your deposits coming in. They will cancel your fund transfer requests out when you have the cash in your account. Any brokerage firm that has a (909) and a non 800 number for contact is second rate. You get what you pay for and how much are the commissions? Bunch of Mc Donalds graduates working on the phones as well. Did I forget their website which is a joke? Two sets of passwords to get in and the worst trading platform I have seen. Try using the history or cash history and a pension services page pops up with id/password requirement. I have used Schwab, TD Waterhouse, TD Ameritrade, Datek , Ameritrade, and Scottrade. This is by far the worst trading platform. Even trading platforms from pre 1999 is better than this trash. Be warned stay away from Zecco. Better yet try them out and see for yourself.
Zecco would be great for students, new investors, or small accounts. Anything above the minimum and you will pay in fustration. Thank god I put only a small fraction of my funds into this hell hole third rate trash trading brokerage firm. Currently have TD and Etrade. I love the real time fund transfers of Etrade level 2s as well as TD’s Apex free unlimited wires. I never tried wiring money out of my Zecco but I am afraid they would charge me for something that would take days or the same speed as their ACH tranfers.
Good Riddens
souds like you are about to start up brokerage that will be better that zecco let me tell you this much i will be your first customer as you will be (sounding) better than zecco
look if you can not appreaciate its okay but imagime this is a start up with $ 10 Million. rest of big ones are around for decades and still are not at all beneficial for individuals like me actually they are disaster for me
Thanks zecco for giving starters a platform to begin our way to weatlh and over time zecco will be the best and respected Mr. Victim sorry on behalf of zecco and give zecco 4th the amount of time and lets see who is the winner your big guyz or my small broker
I got a very bad experience, I made a deposit through ACH and find my bank account has been closed. Their web site has no way to cancel the transaction and the phone are holding too long that I am able to talk to the customer serive after trading hour. There’s no way to cancel the deposit request and they charge $25 with magin calls on my account. Now I have to paid the interest on negative balance. That’s the first time I heard that no way to cancel the ACH transaction during business hours. Now I know “no free lunch”. I have confident that some day you lost your money and they have something coming up for it.
p.s. you couldn’t find the way to cash out from you account too. check their web, I spend 45 min and just couldn’t find one
They will loose 110,000 customers cause of theis weeks website problems!
ZECCO TRADING SUCKS, and I have to go through this not once, but twice because I forgot how really bad the service is. I literally have been on hold for 1.5 hours and still counting—really!!!!!!! I am getting out of all possible positions so that I can start another account elsewhere–any suggestions, already have a Scottrade and Sogotrade accounts. Need one that will do stock and options trading.
Zecco - pretty good for being free, and it gets better
I’ve been using Zecco for a year and half. I would recommend it to people who have a small amount of funds, yet as Zecco gets better, I think we will see people open accounts with larger funds. I’ve had my difficulties with Zecco. Usually with transferring money in and out of the account. So I wouldn’t use it as a savings account by any means.
The only thing I’m worried about is Zecco closing it’s doors because too many of their customers have bad experiences. Yet, they seem very focused on giving great customer service for the price. When their services went down during that intensive trading day, they actually gave everyone free unlimited trades for the month of October!