TD Ameritrade Launches Commission-Free Trading

Charles Schwab and Interactive Brokers have also announced similar services in the past week

Retail broker TD Ameritrade said on Wednesday that it is going to be launching commission-free trading for its clients.

The new service, which is set to go live on Thursday, will be available via the group’s main US entity.

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Clients will be able to access stocks and exchange-traded funds (ETFs) with no commission fees. TD Ameritrade also said that it is cutting prices for options trading to $0.65 per contract.

“This is great news for our clients, and thanks to the diversity of our business model, we’re able to make it a reality,” said Steve Boyle, chief financial officer, TD Ameritrade.

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“We expect this decision to have a revenue impact of approximately $220-240 million per quarter, or approximately 15-16 percent of net revenues, based on June Quarter fiscal 2019 revenue. We’ll have more information about our fiscal 2020 plan when we release fourth quarter earnings later this month.”

Race to the bottom

TD Ameritrade’s decision to launch its new service is part of a growing market for commission-free trading in the US and Europe.

Mobile apps Robinhood and Acorns have pioneered the service, with both gaining millions of customers in the past five years.

Three of the incumbent brokerage giants in the US have responded by launching their own version of the service. Aside from TD Ameritrade, Charles Schwab and Interactive Brokers have also announced commission-free trading offerings in the past week.

“It has seemed inevitable that commissions would head towards zero, so why wait?” Peter Crawford, Charles Schwab’s chief financial officer, told NPR on Tuesday.

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