E*TRADE Joins No-Fee Trading Craze as Rivals Race to Bottom

E*TRADE CEO said the commissions cut will cost the company as much as $75 million in quarterly revenue.

Hours after Charles Schwab and TD Ameritrade eliminated commissions for online trading of some stocks and funds, E*TRADE (NASDAQ: ETFC) matched the move in one of the most dramatic moves in a broad-based price war.

In addition to other features, the brokerage is also slashing the fees it charges on options to $0.65 per contract while maintaining its active trader pricing at $0.50 per contract as of October 7, according to a statement today.

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“The Company recently lowered several investing barriers including: A new $500 minimum for Core Portfolios, $500 minimum for Prebuilt Mutual Fund Portfolios, and $25 minimum for automatic investing recurring deposits,” it further states.

E*TRADE CEO Mike Pizzi said in a statement that the commissions cut would cost the company as much as $75 million in quarterly revenue, which is the equivalent to about three percent of total net revenue.

The move by E*TRADE escalates the price war among US major brokers, which was initiated last week after Interactive Brokers introduced IBKR Lite, which provides commission-free, unlimited trades on US stocks and ETFs.

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Shares of retail brokerage firms TD Ameritrade, Charles Schwab, and E-Trade Financial all traded down upon the announcement, signaling that investors think these steps are squeezing their profitability.

Zero-commission craze takes hold

Charles Schwab Corp also announced yesterday its own commission-free stock trading offering, reducing the fee it charges from next week to zero from $4.95 per trade.

“It has seemed inevitable that commissions would head towards zero, so why wait?” the company CFO said while explaining his firm’s reasoning behind the price cuts.

Online stock trading has become much more competitive since FinTech firms like Robinhood emerged to meet the growing demand for cheaper or entirely free investment products.

Earlier this year, the discount brokerage giant has already expanded the number of ETFs that customers can access without commissions. E*TRADE wasn’t the only brokerage to offer zero-commission as the company is tussling with rivals to expand low-cost investment products. Big rivals, including Charles Schwab and TD Ameritrade, also announced the expansion of its own similar offerings, increasing the total number of ETFs that don’t have a commission attached to them.

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