Vanguard Finally Plays Catch-Up with Free Stock, Options Trading

Mutual fund giant Vanguard Group said it would allow customers to trade stocks and options for free, ramping up the intensity of the brokers’ fight to eliminate trading commissions.

The no-fee trading structure will go into effect Thursday for accounts of all sizes, wiping out Vanguard’s charges per trade, which ranges from $2 to $7. Option traders, however, should be aware that they will continue to pay $1 per contract, though commissions were eliminated.

Before flocking to the free-trading camp, Vanguard brokerage customers were able to trade Exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term-traded funds without a commission. The mutual fund and ETF giant is making more assets cheaper than ever to invest as it attempts to preserve its brokerage business away from discount brokerage rivals, like Fidelity, Charles Schwab, E-Trade, and TD Ameritrade.

Previously, Vanguard offered 25-100 free trades per month only to investors holding at least $1 million in a brokerage account, but now there will be no restrictions, and no minimums required, to use the free-trading feature.

Brokers sent low-cost investing to its natural conclusion

"For 45 years, we've been dedicated to lowering the cost of index and active funds, ETFs, advice, and brokerage services to help investors achieve better outcomes. The expansion of our commission-free platform marks the latest demonstration of this unwavering commitment to our clients," said Karin Risi, Managing Director of Vanguard's Retail Investor Group

The stock-trading business model of US major brokers now resembles Robinhood’s model, which makes money from interest on customer accounts, securities lending, and a small amount from payment for order flow. They had no choice but to fire back with their own enhanced free-trading offers. Robinhood surpassed E-Trade in the number of users, which exploded to more than 10 million earlier last year.

Six years after Robinhood launched with no-fee trading, major brokerages were catching up with a wave of fee-eliminating announcements over the past two months. However, the commission-free investing app was hit by a $1.25 million regulatory fine for not getting the best Execution Execution Execution is the process during which a client submits an order to the brokerage, which consequently executes it resulting in an open position in a given asset. The execution of the order occurs only when it is filled. There is typically a time delay between the placement of the order and the execution which is called latency.In the retail FX space, reliable brokers always strive to deliver best execution to their clients in order to maintain a solid business relationship with them. This is a co Execution is the process during which a client submits an order to the brokerage, which consequently executes it resulting in an open position in a given asset. The execution of the order occurs only when it is filled. There is typically a time delay between the placement of the order and the execution which is called latency.In the retail FX space, reliable brokers always strive to deliver best execution to their clients in order to maintain a solid business relationship with them. This is a co Read this Term price for customer equity orders.

"However, as we move to an environment in which 'zeros' dominate the headlines and explicit fees become implicit, we encourage investors to look more deeply at the total cost picture. Vanguard remains a vocal proponent of clear and transparent fee disclosure," added Risi.