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Schwab Introduces Commission-Free Stock Trading



The bank and stock brokerage firm based in San Fransisco, Charles Schwab has ruled on Monday (7/10), that the stock brokerage firm will cease commission fees for its online trades of stocks, exchange-traded funds and all alternative trade options services from the previous price tag of $4.95. Subsequently, for the past two weeks since the brokerage fee wars started, a handful of its competitors, E-Trade, Interactive Brokers, and TD Ameritrade to name a few, has pursued to trail Schwab’s verdict by exterminating its commission fees as well.


These corporation’s resolute accord to scrap its fees is mainly attributable to the steadily falling cost of investing. Charles Schwab once mentioned that the broker’s move to zero commissions was the realization of his ultimate vision -- making investing accessible to all. Aside from that, the CFO of Charles Schwab, Peter Crawford, stated that eliminating trade commissions was an inevitable logical conclusion. The ruling was also deemed inevitable due to the never-ending progress of technology. The firm, valued at 45,7 billion dollars, has its shares fell almost 10 percent on Tuesday (8/10), but competitors that may be affected by the decision were affected even harder. Per reports from the New York Stock Exchange, E-Trade was down more than 16 percent, and TD Ameritrade was down more than 25 percent.


Thus, for the sake of satisfying clients who demanded a lower price, the firm sought for alternative routes to generate income. Hence, they plan on gaining lost profit (The new plan will cost Schwab roughly 3 to 4 percent of its total net revenue) by utilizing their fixed income from financial advice and planning services. As a result, their decision to scrap commission fees will ultimately intensify the competition around. Now, people could invest freely and act without consequence, but this might very well be a great step into the future or a recipe for disaster, as the announcement pushes the boundaries for what’s considered the norm in the online trading market.


Sources:

CNBC

NY Times

Reuters


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