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BlackRock says free trading at brokers will push ETFs even further

BlackRock Inc. is already reaping the benefits of the online brokerage industry's recent price war.

Two weeks after Charles Schwab Corp., E*TRADE Financial Corp. and TD Ameritrade Holding Corp. eliminated their online commission fees for clients trading most U.S. stocks, options and exchange-traded funds, BlackRock executives say the company's ETF business, iShares, has already seen its presence expand on the online brokers' platforms.

"With the commission free moves, we now have access to more clients than ever before and remain confident that the iShare value proposition will continue to drive growth," BlackRock Chairman and CEO Larry Fink said Oct. 15 during the company's second-quarter earnings conference call. "The elimination of barriers to investing is a good thing. It democratizes access and enables more people to save, invest and reach their long-term financial objectives."

As the world's largest asset manager, BlackRock has become increasingly focused on ETFs in recent years.

Investors have flocked to ETFs in search of a single asset that carries broader market or sector exposure. ETFs are based on a group of different stocks, bonds or other assets but trade as a single security on an exchange. Between July 1 and Sept. 30, BlackRock posted total net inflows of $84.25 billion. Nearly half of that came from its iShares ETF business alone, with fixed-income, factor and sustainability-focused funds driving much of that growth.

BlackRock projects that the ETF industry as a whole will double in assets over the next five years, Fink said.

By introducing $0 commission fees, the online brokers have opened up a new opportunity for ETF providers like BlackRock, President Robert Kapito said on the call.

In particular, the company has seen commission free trading attract ETF flows from U.S. registered investment advisers and direct investors, who represent a combined market of about $12.5 trillion.

"This is just another way that we think is going to going to increase interest and demand for ETFs," Kapito said.