TD Ameritrade and Fidelity Slashing US Equity, ETF Trading Commissions

Retail brokerages in the US are trying to cater to more cost-focused customers.

Retail stock trading in the United States is about to get cheaper in 2017, with two key industry players, TD Ameritrade and Fidelity Investments, cutting their online equity and exchange-traded-funds (ETF) commissions for investors.

The trend has been seen at other rivals recently, including Charles Schwab, which also opted to decrease its trading commissions to $4.95 from $6.95. However, in a bid to underpin their respective rivals, both TD Ameritrade and Fidelity have also resorted to the same sort of discount for investors.

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TD Ameritrade will be lowering its options pricing to $6.95 from $9.99 as well as $0.75 per contract, which will take effect this month – the move was even more stark at Fidelity, which unveiled plans to lower its online trading commission to just $4.95 from $7.95, now making it the lowest price on the market amongst the big retail brokerages in the US.

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Pricing Impetus

Trading commissions had been relatively stagnant over the past few years, and in some cases decade, in the United States, with brokerages such as Scottrade, TD Ameritrade, and others holding steady in their pricing. However, with volumes pointed lower in 2017, many brokerages have instead looked to capture a more cost-focused market.

Such tactics have been utilized in the past with sign up offers or other incentives, though many brokerages now are instead focusing on simply reducing commissions as the best way to soak up new business. Lower commissions could also signal more trading volumes on the whole for ETF instruments, which had already managed to see strong growth in 2016.

Both TD Ameritrade and Fidelity are joining other industry players in pegging their growth prospects on pricing, part of a comprehensive bid to widen the tent for new investors as well as siphoning business away from rivals.

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