Charles Schwab Corp. is joining the free-trading craze that has been sweeping across the online brokerage industry for years.
The San Francisco-based company is cutting its commission fees to zero for clients when trading U.S. stocks, options and exchange-traded funds online, beginning Oct. 7. Currently, Schwab's commission rate is $4.95. Clients will still have to pay 65 cents per contract when trading options.
"Price should never be a barrier to investing for anyone, whether an experienced investor or someone just starting on the investing path," Schwab President and CEO Walt Bettinger said in a statement.
The move comes at what appears to be the precipice of another price-cutting war between online brokerages.
At the beginning of 2017, the leading U.S. online retail brokers including Schwab, E*TRADE Financial Corp., TD Ameritrade Holding Corp. slashed their costs to trade in an attempt to make their services more widely accessible to younger and less-affluent customers. Many of those companies' executives were hesitant to go so far as dropping their commission rates entirely, though. Schwab's Bettinger said in an interview with S&P Global Market Intelligence in 2018 that "no one does trading for free."
But, with pressure from free-trading services such as those offered by Robinhood Markets Inc. and JPMorgan Chase & Co. building, those companies are starting to switch their tone. Schwab's announcement came just days after one of its chief rivals, Interactive Brokers Group Inc., unveiled a free-trading platform of its own.
Shares across the online brokerage industry plunged immediately following the market's open Oct. 1, just a little more than an hour after Schwab announced its decision.
As of 9:37 a.m. ET, Schwab's shares were down 9.6% to $37.81, while E*TRADE's stock tumbled 18.2%, TD Ameritrade's shares fell 20.9% and Interactive Brokers saw a 7.0% drop in its stock.
