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>>> Schwab, Ameritrade Adopt Zero-Fee Stock Trades; Schwab Dives; TD Ameritrade, E-Trade Crash


Investors Business Daily

10-1-19

https://finance.yahoo.com/m/d1808c5d-f955-3515-af19-6f007c59ed1d/schwab%2C-ameritrade-adopt.html



Charles Schwab (SCHW) joined Interactive Brokers (IBKR) in ditching trading commissions on stocks and ETFs, as online-broker fee wars intensify. Charles Schwab stock plunged with IBKR stock, while E-Trade Financial (ETFC) and TD Ameritrade stock tanked to multiyear lows. After the close, TD Ameritrade (AMTD) said it'll go to zero-fee trades as well.

Starting Oct. 7, Schwab will offer zero-fee trades on stocks, ETFs and options listed in the U.S. and Canada. Options traders will continue to pay 65 cents per contract.

Stock trades at Schwab currently cost $4.95. The online broker kicked off a round of fee cuts in February 2017, lowering commissions from $8.95 to $6.95 and finally to $4.95, in response to a move by Fidelity Investments.

Meanwhile, TD Ameritrade will kick off zero-fee stock, ETF and options trades on Oct. 3, down from $6.95. Options traders will pay 65 cents per contract.

Tuesday's moves by Schwab and Ameritrade come days after Interactive Brokers announced unlimited no-fee trades for retail investors. Interactive Brokers kept a low-fee stock trading option, with potentially better pricing for professional investors.

Interactive Brokers' zero-fee stock trading service also debuts this month. Both Interactive Brokers and Schwab will do away with account minimums. TD Ameritrade didn't specify, but will provide a final pricing schedule on Oct. 3.

Both Schwab and Interactive Brokers have tied their zero-fee changes to broader investing access. Schwab CFO Peter Crawford, in a blog post Tuesday, also cited "new firms trying to enter our market." That could be an allusion to the zero-fee Robinhood app, which has disrupted stock trading. Also, Wall Street giants JPMorgan Chase (JPM) and Bank of America (BAC) have ventured into some form of free trading of late.

Robinhood responded Tuesday that it remains focused on "intuitively designed products" that reduce barriers to investing, including account minimums and commission fees.

TD Ameritrade CEO Tim Hockey said in a statement: "We've been taking market share with a premium price point, and with a $0 price point and a level playing field, we are even more confident in our competitive position, and the value we offer our clients."

No word from E-Trade Financial, but the move to zero-free stock trades seems irresistible.

Schwab Stock Dives

Schwab stock plunged 9.7% to close at 37.76 on the stock market today. As for the other online brokers, IBKR stock lost 9.5%, TD Ameritrade stock tanked 26% to hit a three-year low of 34.64, and E-Trade stock reeled 16% to a two-year low. Fidelity is privately held.

TD Ameritrade stock rose slightly in late trading after the brokerage announced zero-fee trading. The other online brokerage stocks were little changed.

Fee wars have escalated since 2013, as zero-fee trading apps like Robinhood strike a chord with new investors and rack up users at a furious pace.

But online brokers' moves to zero-fee stock trades bode ill for the planned Robinhood IPO.

Online brokerage stocks, including Charles Schwab stock, have lagging RS lines. The relative strength line, which tracks a stock's performance against the S&P 500, is the blue line in the charts provided.

Stock and ETF trade commissions are a small part of online brokers' revenue. Schwab derives 90% of net revenue from net interest income and asset management fees. But TD Ameritrade and E-Trade are more exposed.

All four publicly traded online brokers are seeing decelerating or declining profit growth.

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