E-Trade has followed Schwab and TD Ameritrade, announcing commission-free trades for stocks, ETFs and options.
E-Trade is eliminating commissions on all three beginning Monday, the same day as Schwab. TD Ameritrade will stop charging commissions Thursday.
Not to be outdone, E-Trade is also reducing its active trader price for options from $0.65 per contract to $0.50. (Schwab and TD Ameritrade charge $0.65 per contract.)
“With this new commission schedule we are further raising the bar, delivering an unrivaled experience at price points that cannot be beat,” said E-Trade CEO Mike Pizzi in a statement. He went on to explain that while Main Street investors will be able to trade stocks and ETFs at no cost, the brokerage’s most active derivative trades will enjoy its “industry-leading contract rate.”
Like Schwab and TD Ameritrade, E-Trade will lose revenue as a result of commission-free trades. Based on second-quarter 2019 operating results, E-Trade estimates its pro forma revenue will be reduced by approximately $75 million.
Soon after E-Trade’s announcement, Fitch Ratings reported that the online trading commission cuts announced by the three brokerages this week are a “credit negative for the retail brokerage industry,” but other retail brokers will likely follow.
No-commission trades “will pressure industry revenues, further emphasizing the importance of net interest income from accompanying bank sweeps, wealth management and investment management revenues, and will likely drive further industry consolidation,” wrote analysts Michael Taiano and Dafina.