The Race to Zero in Trading Fees

Just in this past week Fidelity, TD Ameritrade, Schwab, and E*Trade have all slashed their online stock trading fees in what appeared to be a well-coordinated effort. Fidelity reduced its fees from $7.95 to $4.95, TD Ameritrade reduced its fees from $9.99 to $6.95, Schwab reduced its fees from $6.95 to $4.95, and E*Trade reduced its fees from $9.99 to $6.95. All four firms have faced growing pressure to reduce fees as investors have become more expense focused due to the growth in zero commission low cost ETFs and increased competition by new fintech stock trading platforms like Robinhood, which doesn’t charge a trading fee.

As more disruptive competition emerges, online discount brokers will continue to feel pressure to reduce their fees and evolve their revenue model. This is good news as the race to zero in trading fees will help investing in stocks become even more accessible and profitable for retail investors.

 

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