Ally Invest has joined its peers in rolling out free online trading for U.S. stocks, exchange-traded funds and option trades.
The online brokerage and wealth management arm of Ally Financial Inc. is eliminating its long-standing $4.95 commission fee per trade on Oct. 9. It marks the fifth U.S. broker to announce free trading, following moves within the past week by Interactive Brokers Group Inc., Charles Schwab Corp., TD Ameritrade Holding Corp. and E*TRADE Financial Corp.
Ally Invest also announced that clients trading options online will pay 50 cents per trade, compared with the charge of 65 cents per contract seen at Schwab, TD Ameritrade and E*TRADE.
"With continued advancements in technology making online trading increasingly more cost-efficient, it was inevitable our industry would reach a point where self-directed investors could participate in the market for little to no cost," Lule Demmissie, president of Ally Invest, said in a news release. Traditional online brokers have faced continued pricing pressure from new players in the space, including Silicon-Valley startup Robinhood Markets Inc., which rose to prominence with the promise of fee-free trading, and well-established financial institutions such as JPMorgan Chase & Co. and Bank of America Corp.'s Merrill Edge.
Ally Invest did not indicate how the change would affect its revenues, but the online brokers are expected to see significant reductions.
Schwab indicated that it expects a revenue hit of $100 million per quarter, while TD Ameritrade anticipates a $220 million to $240 million decline per quarter. E*TRADE estimated that the revenue impact from zero-dollar trading on its second-quarter results would have been about $75 million.
