TD Ameritrade Holding Corp. is following its rivals' leads by rolling out free online trading for most U.S. stocks, options and exchange-traded funds, marking the latest salvo in a rapidly escalating price war.
Less than 12 hours after Charles Schwab Corp. revealed a similar plan, the Omaha, Neb.-based online brokerage said it was eliminating its $6.95 commission fee for online trades involving exchange-listed stocks, options and ETFs in both the U.S. and Canada. The changes, which go into effect Oct. 3, will not impact the 65-cent-per-contract charge TD Ameritrade customers have to pay when dealing options online.
"We've been taking market share with a premium price point, and with a $0 price point and a level playing field, we are even more confident in our competitive position, and the value we offer our clients," TD Ameritrade President and CEO Tim Hockey, who is set to leave his position in 2020, said in a statement.
The move makes TD Ameritrade the latest on an expanding list of incumbent online brokerages now offering free trading to their customers.
Schwab unveiled roughly nine hours before TD Ameritrade's announcement that it was lowering its commission fees to zero for most online stock, option and ETF trades. That came days after Interactive Brokers Group Inc. detailed plans for a new free-trading platform of its own that is expected to launch in October.
TD Ameritrade is joining in on the industry's latest price war as traditional online brokers face continued pricing pressure from newer players in the space, including big banks like JPMorgan Chase & Co. and leaner trading-focused technology companies such as Robinhood Markets Inc.
Free trading does have its costs, though.
The company expects to see approximately $220 million to $240 million in revenue impact, or 16% of its net revenues in the June fiscal 2019 quarter, because of its decision to move away from commission fees, CFO Steve Boyle said in a statement. Boyle added that TD Ameritrade plans to have more information about its fiscal 2020 plan in its upcoming fiscal fourth-quarter earnings report.
Toronto-Dominion Bank said in a statement that the decision to cut commission fees will have a "proportional effect" on the bank's reported equity in net income of an investment in TD Ameritrade for fiscal 2020.
TD Ameritrade's announcement capped a day in the stock market where its share price plunged 25.76%.
As of 7:59 p.m. ET, TD Ameritrade's stock in post-market hours rose about 1.3%.
