The price wars in the online discount brokerage world is heating up, again. This morning, Fidelity Investments announced it has slashed its retail commissions for U.S. stock and ETF trades from $7.95 to $4.95, and reduced options pricing from 75 cents to 65 cents a contract. Shortly after, Charles Schwab responded with its own price cut: it will reduce trading commissions from $6.95 to $4.95, and lower its options pricing to match Fidelity’s.
“Our active trader clients who make hundreds of trades each year will particularly benefit from our dramatic price reductions, and all clients who trade will be able to keep more money in their pockets,” said Ram Subramaniam, president of Fidelity’s retail brokerage business.
“We never want commission costs to be a barrier for investors deciding which firm can best serve their needs,” said Schwab President and Chief Executive Officer Walt Bettinger. “In addition to low commissions, our industry-leading low-cost S&P index mutual fund is nearly five times less than Vanguard and three times less than Fidelity."
Discount broker E*Trade charges $9.99 for U.S. equity and options trades. TD Ameritrade announced late Tuesday that it was cutting commissions from $9.99 to $6.95. The firm will also lower options pricing to $6.95 plus 75 cents a contract starting March 6.
“There is an effort underway in our industry to redefine value. While some are leading with price, our clients tell us it’s much more than that,” said Tim Hockey, president and chief executive officer of TD Ameritrade, in a statement.
Earlier this month, Schwab announced it was cutting online equity and ETF trading costs from $8.95 to $6.95, and that it was reducing expenses on certain index funds and ETFs. The brokerage also eliminated minimums and instituted a single-share class for these funds. It also introduced a new Satisfaction Guarantee in which the firm will refund fees to any client who’s not satisfied.