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Interactive Brokers unveils plans for free-trading platform

Interactive Brokers Group Inc. will soon become the latest Wall Street brokerage to offer free trading.

The Greenwich, Conn.-based broker/dealer plans to launch a new platform in October that will allow users to trade U.S. exchange-listed stocks and exchange-traded funds without having to pay a commission fee or hold a minimum account balance.

Interactive Brokers is rolling out free trading at a time when the price to swap stocks and ETFs for both retail and institutional investors is cheaper than ever.

Technology-based financial firms such as Robinhood Markets Inc. first pioneered free trading. But the movement has since garnered support from the likes of JPMorgan Chase & Co. and now Interactive Brokers. Other traditional online brokers including Charles Schwab Corp., TD Ameritrade Holding Corp. and E*TRADE Financial Corp. have thus far largely resisted calls to introduce free trading for clients. As of Sept. 27, Charles Schwab markets its lowest price to trade stocks and ETFs online as $4.95. Both TD Ameritrade and E*TRADE charge $6.95 per online equity trade, according to their websites.

Thomas Peterffy, an electronic-trading pioneer who is chairman and CEO of Interactive Brokers, said in a statement that the company's decision to offer free trading was driven in part by its desire to expand its reach beyond the sophisticated investors and institutions that have historically used its existing services. Its current offerings will be rebranded as IBKR Pro.

Interactive Brokers' stock climbed the day after announcing IBKR Lite. As of 11:08 a.m. ET on Sept. 27, its shares had jumped 4.4% to $52.99 since the Sept. 26 market open.

The other major online brokerages saw sharp drops in their stock prices following Interactive Brokers' announcement, something Compass Point analyst Chris Allen wrote in a Sept. 27 note that he suspected was "a bit of an over-reaction." As of 11:08 a.m. ET on Sept. 27, Schwab's shares have fallen 0.4% since the beginning of trading Sept. 26. TD Ameritrade saw a 3.8% decline in its stock price during the same time period, as E*TRADE's shares fell 2.4%.

Still, while pressures continue to bear down on traditional online brokers, the likelihood of another price-cutting war between those companies remains slim, Allen wrote.

"We do not see this announcement as firing up another competitive pricing cycle, although we will be paying attention to see what kind of traction [Interactive Brokers] gets with this offering," Allen wrote. "Given the demand from introducing brokers, this should, at the least, help moderate whatever account attrition [Interactive Brokers] was seeing in this customer base due to zero commission pricing."