Charles Schwab is shaking up the brokerage industry.
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The company said that trading stocks and exchange-traded funds in the United States and Canada will be free on its platform beginning Oct. 7. The $4.95 per trade fee will also be dropped for options transactions, but users will still be charged 65 cents for each contract. Brokerage shares plunged on the news.
|ETFC||E*TRADE GROUP (E*TRADE BANK AG)||45.37||-0.17||-0.38%|
|AMTD||TD AMERITRADE HOLDING||51.33||+0.24||+0.47%|
“This is our price. Not a promotion. No catches. Period,” CEO and President Walt Bettinger said in a press release Tuesday. “Price should never be a barrier to investing for anyone, whether an experienced investor or someone just starting on the investing path.”
In a commentary posted to Schwab’s website, Chief Financial Officer Peter Crawford said the decision will cost the company $90 million to $100 million in quarterly revenue, or about 3-4 percent of its total revenue. He added that commissions have been falling over the past few years, so the potential impact may be even smaller.
Crawford said removing the fees eliminates “the last remaining barriers to make investing accessible to everyone.”
Schwab’s announcement comes amid an increasingly competitive landscape in the brokerage industry. JPMorgan Chase last year said it would give customers 100 free stock or ETF trades for a year. The free trading app Robinhood disrupted the industry when it launched back in 2013.