BAC no commission stock trades
can anyone tell me how it works and what are the paramaters. Also what does this do for BAC brokers
In order to receive the 25 free trades you must maintain a minimum of 25k in a DEPOSITORY accounts. (Checking, savings, CDs, non-brokerage IRAs, etc.) The interest on a BAC savings is .02 percent, for example, or you can go with the “interest maximizer” and get just under 2% for that balance, although you’ll get hit with a $15 fee for going under 10k in any given month under most circumstances.
This was a smart move for BAC since the difference in interest (or lack thereof) will far outweigh the $250 in commissions for a 25k balance, assuming you have an account that entitles you to $9.99. Some get $7 trades so they save $175 per year in comish. Either way the customer is getting screwed while thinking they’re getting something for free. The irony is that most pikers that are that worried over a trade commission are probably not going to have 25k in a deposit account anyway. Here’s the interest you’d get in a savings elsewhere on 25k:
Ing Orange Savings, 4.5 APY: $1125.00
Wamu Online Savings, 5.0 APY: $1250.00
E*Trade MM Account, 5.05 APY: $1262.50
Tons of other rates available at www.bankrate.com
Compare this with BAC:
Regular or Business Savings, .02 APY: $50
Interest “Maximizer” (for applicable tier, fluctuating around 1.9): $475
As you can see, the value of the deposits far outweigh what’s being given up in commission. As for how this will effect BAC brokers? Well, if you’ve decided to stay there, you’re screwed to begin with.
This made some news on CNBC and knocked down the share price of AMTD, ETFC, and SCHW for a couple days before people saw what’s up. Ultimately it will have very little effect on anyone.
[quote=xbanker]As for how this will effect BAC brokers? Well, if you've decided to stay there, you're screwed to begin with.[/quote]
Bank of America management (on both bank and investment ends) have conceded that the $0 trade strategy is strictly to bring in more bank deposits. This has nothing to do with the brokers. Except that we got stuck servicing them if they don’t know how to use a computer or phone.
It's actually a non event if you are a BAC FA. Whenever a client or prospect asks about it (and I've probably been asked 3x since it started), i tell them it is a self directed account that they open on the web - it IS free and I cannot see it and they can use an 800 # for support. I tell them "if you have your own idea to trade - please do it on the $0 trade platform"
I don't want to take 200 share orders for SIRI and then have to track down BS research and follow the stock after discounting the trade - to let the client blow himself up. It is liberating to tell them to do it online.
Incidentally, that $25k can be in the "risk free CD" and earn 4.50% - so it's not that bad compared to other places - if you are an active trader. I think it's margin interest etc. that we're after more than holding onto $25k. I think it's also just a loss leader to try to bring people in.