Warring Like It's 1999

Internet deals are back. So are IPOs. Just like 1999! As if to prove the point, online brokers have started new price wars. Charles Schwab & Co. launched the first salvo in January by eliminating account fees for customers with $25,000 or more in household assets, and even losing the fees for those with $10,000 to $25,000 if they use certain credit products. Since then, Ameritrade has announced plans

Internet deals are back. So are IPOs. Just like 1999! As if to prove the point, online brokers have started new price wars.

Charles Schwab & Co. launched the first salvo in January by eliminating account fees for customers with $25,000 or more in household assets, and even losing the fees for those with $10,000 to $25,000 if they use certain credit products. Since then, Ameritrade has announced plans to launch a $5 per trade IZone, and E*Trade has declared its intention to reduce commissions for its “best customers” to as little as $6.99 per trade.

Analysts say the ferocity of this battle doesn't really make sense since some of these firms don't have offline trading.

If it's any comfort to retail brokers — who still get funny questions from clients about why they don't get $7 trades — the price wars can exact a heavy toll on the online business. The cuts set off concerns about profitability as online brokers once again battle for market share — as they did up through the market plunge of the early 1990s. The latest price war has already depressed the shares of the leading online traders, including Schwab and Ameritrade.

TAGS: Archive
Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish