| | | TD Ameritrade Joins Fidelity, Schwab In Slashing Stock, ETF Commissions
PAUL KATZEFF 03/01/2017
The online brokerage industry's price war escalated into a full-scale shoot-out on Tuesday. In the morning, just as Fidelity Investments' new, lower, base online retail commission for U.S. stock and ETF trades took effect, Charles Schwab ( SCHW) blasted back at the Boston-based behemoth by matching its revised $4.95 commission.
Tuesday night, TD Ameritrade ( AMTD) jumped into the slugfest, hitting back with a new $6.95 base price per trade, which will replace its current $9.99 fee on March 6.
Fidelity had started the day by responding to Schwab's Feb. 3 price cut. Fidelity, which lays claim to the mantle of largest online brokerage firm with its 17.9 million accounts and $1.7 trillion in total brokerage client assets, had slashed its commissions by $3 per-trade reduction, or 38%. It was Fidelity's first commission cut in 7 years.
Charles Schwab cut its base online equity and ETF trade commission to $6.95 from $8.95 on Feb. 3. Schwab's Tuesday cut lopped $2, or 29%, off its less-than-one-month-old base commission. Schwab also responded to Fidelity's new options price with a lower fee of $4.95 plus $0.65 per contract. All of Schwab's new prices take effect March 3. Fidelity's took effect Tuesday.
Fidelity's move Tuesday had briefly made its commissions lower than Schwab's. It also fell far below the $9.99 base commission charged by E-Trade Financial ( ETFC) and, for a few more days, TD Ameritrade.
Charles Schwab shares rebounded 5.6% in afternoon trade on the stock market today, after sinking 3.2% on Tuesday. TD Ameritrade rose 3.5% after crashing 10.5% Tuesday. E-Trade, which has yet to join the price cuts, rose 4.1% after skidding 7.2% Tuesday. Both Ameritrade and E-Trade sold off on Schwab's initial Feb. 3 fee cut.
Fidelity is privately held.
Smaller brokerages TradeKing and OptionsHouse also levy $4.95 base commissions. Interactive Brokers' ( IBKR) base rate is $1 per share, falling to 0.5 cent per share for large enough trades. An account balance of at least $10,000 is required.
Interactive Brokers stock climbed 4.1% intraday, more than offsetting Tuesday's 2.6% loss.
Fidelity also boasted that its online options prices and margin rates were the lowest of the four biggest online brokerages — itself, TD Ameritrade, Schwab and E-Trade.
In addition, Fidelity claimed an average $10.79 price improvement in comparison with an industry average of $1.71. Price improvement reflects the difference between the maximum price a buyer says he will pay and the actual asked price that the broker obtains. For sellers of securities, it means they got more than the bid price on average.
Ram Subramaniam, president of Fidelity's retail brokerage business, told IBD that investors should consider its new low price in conjunction with Fidelity's overall services. "We're committed to being the value leader," he said. "We're committed to being the pricing leader, and to delivering the best client experience in terms of research, platform, innovation and transparency."
Fidelity, Schwab and Ameritrade have been in the top three online stock brokerages for overall customer experience three of the past four years.
For Fidelity, 2017 is the third year in a row that the Boston-based firm took the top overall spot in IBD's annual Best Online Brokers survey. Impressively, Fidelity had the first- or second-highest customer rating in all 13 survey categories. What started as one of the leading mutual fund families has now become a force in online trading.
Less than two weeks ago, Fidelity released its annual report, showing that 2016 revenue rose 3.4% to $15.9 billion, a record for the privately held company.
The combination of revenue growth and slightly lower expenses produced a record profit of $3.5 billion. That was an increase of 19.5% over 2015's $3 billion in operating income.
Jim Lowell, editor of the independent Fidelity Investor, said Tuesday, "(Fidelity's) diversified business model . . . enables them to draw others into siloed price wars at the expense of their competitors' bottom lines while simultaneously creating more immediate top line opportunities and marketshare potential for Fidelity."
Fidelity, Schwab and TD Ameritrade also dropped prices on options trades.
http://www.investors.com/etfs-and-funds/mutual-funds/fidelity-slashes-online-stock-etf-commission-to-4-95-a-38-cut/
(even other firms have dropped there prices in response to this full blown price war. I was talking with an account executive at Tradestation and on stock and option acts they have dropped their fees to $4.95 and eliminated all of the volume of transaction restrictions and have stopped charging for their platform..... even if the account is used extremely infrequently....... JJP) |
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