E*Trade will eliminate all retail commissions for stock, ETF and options trades starting Oct. 7, the brokerage firm revealed. The announcement comes a day after both Charles Schwab and TD Ameritrade announced that they would also eliminate commissions on trades.
“With this new commission schedule we are further raising the bar, delivering an unrivaled experience at price points that cannot be beat—Main Street investors will now trade the stocks and ETFs of their choice for $0, while our most active derivative traders will continue to enjoy our industry-leading contract rate, which when combined with the $0 base rate, our first-class derivatives platform, and world class active trader service team, results in an unparalleled value proposition,” E*Trade CEO Mike Pizzi said.
Charles Schwab and TD Ameritrade both announced their respective cuts to commissions a week after Interactive Brokers Group launched its own commission-free app and desktop service. E*Trade currently charges a commission of $6.95 per trade for stocks, options and ETFs. The race to zero is the culmination of a multiyear period of online brokerages cutting their trading fees and options pricing, including TD Ameritrade, Schwab and now E*Trade.
According to E*Trade, the commission changes would have affected the company’s revenue impact by about $75 million in 2019’s second quarter. Some 18% of E*Trade’s revenue consists of commissions’ contribution to net income, according to William Blair analyst Chris Shutler, who suggested that the company would absorb a dip of between 11% and 14% in revenues if the company slashed commissions. Shutler hypothesized that TD Ameritrade may be a lead candidate to take over E*Trade, “given its need to scale up even more and given its ability to take out more costs than any possible buyer, except perhaps for Schwab.”
Like E*Trade, Schwab’s new commission changes go into effect on Oct. 7, TD Ameritrade’s change will be effective on Oct. 3.