In what may go down in history as the most dramatic price war in the online brokerage space, E*TRADE (read our review) has officially announced a commissions reduction from $9.99 to $6.95, matching TD Ameritrade.
Alongside the reduction in standard equity commissions, however, is an update to the broker’s active trader pricing tier. Currently, customers must place at least 150 trades each quarter to qualify for E*TRADE’s lowest commission rates. Under the new pricing structure, only 30 trades must be placed each quarter. Not only that, the rates drop all the way to $4.95 for equities trades and options trades will cost just $4.95 + $.50 per contract, which is lower than even Fidelity and Charles Schwab.
The entire new commissions structure goes into effect Monday, March 13th. On a high level, here’s how E*TRADE, TD Ameritrade, Fidelity, and Charles Schwab’s trade commissions now all compare.
The new active trader commissions tier is a huge deal because options traders are highly coveted by online brokers. E*TRADE acquired the #1 rated broker for options trading, OptionsHouse (read our review), last summer for $725 million. OptionsHouse’s base rates were $4.95 for equities and $4.95 + $.50 per contract for options.
Coincidence? I think not.
E*TRADE’s executive team strategically thought through its response and put out a terrific new pricing schedule for customers. Considering E*TRADE options and active trader offering was good but not industry leading before, thanks to its new pricing and upcoming integration of OptionsHouse, E*TRADE’s competitive stance has never looked better.
Karl Roessner, CEO of ETRADE, commented on the new commissions,
We have built a best-in-class offering that includes powerful digital tools, online advice and professional financial consultants to serve the needs of traders and investors. While we know that an exceptional customer experience is far more important to traders and investors than price, with our new commission structure we are able to reward our most active equity and derivative traders and investors, while at the same time providing exceptional value to all who call E*TRADE home.
The online broker pricing war may very well end here. That said, E*TRADE’s new active trader pricing is so attractive that it could force a reaction from TD Ameritrade. Regardless if TD Ameritrade reacts or not, it’s been a heck of a week.
So who comes out best in the end?
Well that one’s easy. Without question, retail investors across the United States are the winners… by a landslide.
E*TRADE Announces Base Rate and Active Trader Commission Reductions
March 2nd, 2017