Yesterday, Charles Schwab announced it would eliminate trading commissions on US-listed equities, ETFs and options (keeping a small per contract charge). As Crowdfund Insider predicted, other online brokerages are copying Schwab’s actions as TD Ameritrade (NASDAQ:AMTD) has now done the same.
Starting October 3rd, clients with a TD Ameritrade account will pay zero commission on US-listed stocks as well as ETFs. Similar to Schwab, commissions on options trading have been eliminated too but a small per contract fee remains.
In a promotional email, TD Ameritrade had this to say:
“The change to zero commissions comes with zero change to the level of service you’ve come to expect. You still get unlimited free access to our best-in-class trading platforms. Plus, you get award-winning service and education, and an extensive branch network.”
Tim Hockey, President and CEO of TD Ameritrade commented in a release:
“We are committed to giving our clients the best possible investing experience, with cutting-edge technology and award-winning investor education and service teams. And now, that experience just got better,” said “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.”
Shares in TD tanked even further after dropping a whopping 25% in just one day.
So did the sky fall? Are cats sleeping with dogs? Not really, but Steve Boyle, TD’s CFO said the revenue loss would be about $220-240 million per quarter, or approximately 15-16 percent of net revenues.
The headlines fueled the flames of investors dumping TD Ameritrade:
“With $0 Fees, Schwab Risks Blowing Up Brokerage Model It Built,” said Bloomberg.
“TD Ameritrade joins race to the bottom on fees…” said Marketwatch.
There is plenty more.
What is happening to TD, Schwab and other “traditional” online brokers is the same thing they did to the in-person, call on the phone, brokerages of lore. TD and Schwab have morphed into the disrupted instead of the disruptors as Fintech marketplaces steal their thunder.
So what will they do? Close branches, of course. Cut headcount. Become more internet friendly. Add crypto trading. And offer a growing number of automated or online services. Spreads may increase too, but that is just speculation for now.