Charles Schwab TD Ameritrade $0 Tanks, E-Trade Stocks
Yesterday Charles Schwab announced he was getting rid of commissions on stocks, exchange-traded funds and options listed on US or Canadian stock exchanges on Monday. Online trading commissions were $4.95.
Eliminating those commissions equates to $90 million to $100 million in quarterly revenue, or about 3 to 4 percent of total net income, chief financial officer Peter Crawford explained on the company’s website.
“[C]omissions by revenue have been declining for several years, so the potential revenue impact in future quarters could very well be smaller, all else being equal. It would have been easy for us to kick the street, not respond to the proliferation of free commission offers for another quarter, another year,” he wrote, explaining that Charles Schwab is “ ready to disrupt us if necessary. and prioritize long-term growth and success, even if short-term results are impacted. »
Wall Street does not rejoice. Charles Schwab stock closed around $42, but fell below $37 on the day of the announcement. It closed at $36.51 today.
And it’s not because Charles Schwab is an underage player. The 48-year-old company has $3.72 trillion in client assets as of August 31.
The 180 on the giant’s commissions impacted the shares of similarly positioned brokerages. TD Ameritrade, which was near $47 on Monday and closed today at $33.54, had its worst day in two decades, and E-Trade fell from around $44 on Monday to $35.20 at the closing this afternoon.
Part of what spooked investors might be the need for others to follow Schwab’s decision. TD Ameritrade already has; he announced a plan to remove commissions, currently $6.95, for online trading in stocks, ETFs and options, starting tomorrow. And today, E-Trade said goodbye to commissions or these three types of transactions, starting Monday.
At Schwab, clients trading options will still be charged 65 cents per contract. Ditto for TD Ameritrade customers. E-Trade reduces options contract fees to 65 cents per contract for all traders; its active trader price will remain at 50 cents per contract.
“From day one, my passion has been to make investing easier and more affordable for everyone,” Founder and Chairman Charles Schwab said in a statement. “Eliminating commissions ensures the realization of my ultimate vision: to make investing accessible to everyone.”
This story has been updated.