FreeTradez will offer market and limit orders at no commission and plans soon to extend that to options and mutual funds, said Jasen Watkins, the company's 27-year-old founder. The company also will guarantee market orders are executed within 45 seconds, or investors will receive a $5 rebate.

That is fine for investors. But how will FreeTradez ever make any money?The company hopes to make a profit through advertising as well as through offering customers a Visa credit card that accrues points redeemable for shares in companies, similar to air miles.

But someanalysts don't necessarily buy this model. "The outlook for those in the financial-services industry looking to exist solely on advertising revenues is pretty bleak," said Henry McVey, an analyst at Morgan Stanley Dean Witter in New York. Greg Smith, who follows online brokers at the Chase H&Q securities unit of Chase Manhattan Corp., said: "It's going to be tough."

FinancialCafe and Ameritrade unit Freetrade.com look to more-traditional sources of revenue, such as margin loans, some commissions (limit orders, for example, start at $5 and $14.75 respectively), and payment for order flow - a widely used and controversial revenue-earning practice where brokers get paid for steering orders to certain trading firms. FreeTradez said it won't charge any commissions at all or accept payment for order flow.

FinancialCafe, which requires no account minimum, said it also has made deals with partners such as clearing and marketing firms and data providers to cut costs. Freetrade, which requires customers have twoyears' online-trading experience, has cut costs by offering a bare-bones service with limited customer service and doesn't plan to advertise.

Still, with more than 175 firms offering online trading, it won't be easy for any new ventures to get a foothold, said Daniel Latimore of Mainspring, an Internet-consulting firm in Cambridge, Mass. "Trying to stand out in that field is very difficult, and it is what these three firms with free trading are trying to do," he said.

Chase H&Q's Mr Smith said building a brand and attracting customers "still takes millions of dollars in advertising."

Moreover, analysts don't anticipate industrywide cuts and question just how many investors are that sensitive to price. "Costs have already come down so low, I don't think there is such a huge demand to go down to zero," Mr Smith said.

If anything, the trend has been toward online brokers increasing value by adding services such as access to research, initial public offerings and advice.

Meanwhile, look for continuedprice breaks for wealthier and more-active online traders, analysts said. American Express Co. was among the first firms to introduce free trades at the end of last year, allowing clients with more than $100,000 in assets to buy and sell stocks online at no charge. E*Trade Group Inc., Menlo Park, Calif., offers commissions as low as $4.95 a trade for customers who make more than 75 trades a quarter.

-- (The Wall Street Journal)