The Charles Schwab Corp. — in a bid to attract more trades from customers who use deep-discount brokerages — plans to lower its commission on all online stock and non-proprietary ETF transactions to $8.95 per trade.
The reduced commission will take effect Jan. 19.
The price betters the $9.99 across-the-board commission that competitor TD Ameritrade Holding Corp. has long offered on Internet equity trading. It also brings Schwab closer to the $7 commission charged by Scottrade for online equity and ETF trades.
Schwab currently charges $12.95 per trade to clients who hold less than $1 million in household assets at the firm or make fewer than 120 trades a year. The brokerage also adds charges for orders over 1,000 shares.
The company's latest attempt to capture trades from small investors comes at a time when its trading volume has been shrinking, Richard Repetto, an analyst at Sandler O'Neill & Partners LP, wrote in a note to clients. Its daily average revenue from trades fell 2.9% in 2009, while trades at competitors TD Ameritrade Holding Corp. and E*Trade Financial Corp. rose 11.1% and 3%, respectively.
Schwab's new price undercuts what TD Ameritrade and E*Trade offer frequent traders or accounts with high assets, but it is unclear whether that will be enough to attract the active traders who fuel discount brokers' volume machines, Mr. Repetto wrote.
Schwab's new prices apply to all retail investors, including RIAs whose clients receive electronic statements and trade confirmations. Retirement accounts and plan administrator services accounts affiliated with Schwab also qualify for the reduced rate.
The new pricing is aimed at encouraging consolidation of client assets and trades at Schwab, the company said in a statement.
Schwab also noted that the program could lower its first-quarter revenue by between $15 million and $20 million.
Schwab last summer waived commissions on online trades and reimbursed account transfer fees to new clients brought to its platform by independent advisers through the second half of 2009. Those fee waivers will continue through the end of June.
“With solid profitability and a healthy balance sheet, we are able to pursue our growth opportunities from a position of strength,” Schwab chief financial officer Joseph Martinetto said in the statement.
The new $8.95 pricing on online stock and ETF trades doesn't apply to foreign-stock transactions, block transactions of 10,000 or more shares, orders over $500,000, restricted stock transactions that continue to have broker-assisted pricing schedules, or employee-negotiated commissions related to stock compensation programs.
Retail investors who trade by phone will be charged $13.95 per trade under the new program, down from $17.95, while those who rely on Schwab brokers will pay $33.95, down from $37.95.
The lower prices on these trades were already available to Schwab clients who made at least 120 trades a year or kept household balances of at least $1 million with the firm.
E-mail Jed Horowitz at jhorowitz@investmentnews.com.
