SEC Fraud

When Zecco first opened its doors, it offered unlimited free trade with no minimum balance requirements. The idea was that you could make as many trades as you wanted and the business would be supported by advertising revenue. A little while later, they realized that was unsustainable and they went to ten trades a month with a minimum balance of $2,500. Some called it a bait and switch, others had already quit using the service because of its customer service woes, but overall they claimed that the vast majority of users never traded more than ten times.

At face value, Zecco was most appealing to day traders because it took away a major cost - commissions. Zecco stood for ZEro Cost COmmissions, too bad they reneged on that mantra a bit. Many thought Zecco was a scam, but further research showed that was a legitimate firm and entirely honest. To my knowledge, there has never been any reports of anything but honest dealings from that firm.

If they’re legitimate, are they worth it? When they offered unlimited free trades, I thought they were worth dealing with the customer service issues. Smart Money magazine to rated them the worst in customer service in 2008. However, when you take away the very meaning of your name, going from unlimited to 10 free trades a month, you leave a bad taste in my mouth. It doesn’t matter if I was never going to trade more than 10 times a month, Zecco promised free trades and no minimums to get me in the door. A bit of time passes and the minimum requirement is $2500 and the free trades are limited to ten a month.

Compared to other discount brokerage firms, Zecco’s offer is no longer compelling. If you were to work with discount broker veteran E*Trade, you pay $9.99 a trade. However, the funds that aren’t locked up in shares can earn 3.30% APY in their online savings account. The benefit of Zecco’s 10 free trades is worth $99.99 a month in that case.

However, let’s go with the newer firm TradeKing, named Smart Money’s Best Discount Broker in 2006 and 2007 (in 2008, they did away with the Best Discount Broker category). TradeKing charges you $4.95 a trade. That brings Zecco’s benefit down to $49.50 a month plus TradeKing has a ton of useful tools if you’re interested in trading options.

The bottom line is that Zecco is legit but not worth it when you have such powerful competitors with better offers (plus those brokers have kept those rates as long as I’ve known them, no bait and switch there).

TradeKing is one of the best online discount brokers available and won Smart Money’s Best Discount Broker award two years in a row! With their compelling and affordable $4.95 per trade offer on market and limit equity trades (both selling and buying), they have been able to capture a significant market share in a short period of time. They’ve also made a name for themselves in the options market with their $4.95 a trade and sixty-five cents a contract, almost unheard of in the business.

In the Smart Money 2008 Broker Survey, in their review of TradeKing, said that TradeKing had the best customer service of all the brokerages they interfaced with, the only one to have earned five stars in that category and had the second cheapest commission structure of the fourteen firms showcased.

Here’s what Smart Money had to say about the stellar customer service of TradeKing:

One firm managed to earn five stars for best overall service: TradeKing. The company recently opened a new client-service center, and the effort seems to be paying off: Live chat worked without a hitch, our e-mails got answered in a speedy average of five minutes, and a phone rep even called us back to clarify his response to one of our questions. Now, that’s service.

If you’re looking for a solid discount brokerage, TradeKing deserves a look.