Fidelity joins broker price wars
Fidelity Investments is the latest major broker to do away with commissions on online stock trades, joining an all-out price war among its rivals.
Fidelity announced Thursday that it will no longer charge customers to trade US stocks, exchange-traded funds (ETFs) or options.
The company, one of the world’s largest asset managers, joins a growing list of brokers that have slashed online trading fees in quick succession.
Charles Schwab last week eliminated commissions for trading stocks, ETFs and options on its mobile and web platforms. TD Ameritrade and E-Trade have also ditched commissions.
E-Trade had been charging commissions of $6.95 per trade, while Fidelity charged $4.95. Fidelity says it has over 20 million online brokerage accounts.
The pace of change across the industry has unnerved investors, who are concerned about how it will affect profits at these companies.
TD Ameritrade stock has dropped 27% since the end of September. Shares in Charles Schwab have declined 10% and E-Trade stock is down 14%.
The challenge for brokers is to differentiate themselves in an increasingly crowded market where price is no longer a selling point.
“In a world of equal footing, it’s all about what you are offering,” Steve Quirk, an executive at TD Ameritrade, said during a recent interview with CNN Business.
Startups have popularized the zero-fee business model such that investors now expect free trading. But they have a very different cost base than traditional brokers.
“Incumbent firms will find it harder to implement and operate the zero-commission model,” said Viktor Nebehaj, co-founder of UK online broker Freetrade.
“As a mobile-only startup, tech enables huge savings and a different cost structure for us,” he added.
– Paul R. La Monica contributed to this report.