Charles Schwab & Co. pushed the fee war to the next level Tuesday morning by announcing that it will eliminate commissions for online trading of U.S. stocks, exchange-traded funds and options starting next Monday.
The brokerage platform currently charges $4.95 per trade for the three asset categories. Investors trading options will continue to pay 65 cents per contract.
Financial advisers mostly celebrated the move as a factor that would force Schwab's competitors to cut trading fees as well.
"It's a race to zero," said Dennis Nolte, vice president of Seacoast Investment Services.
"Fee and commission compression is a real thing," Mr. Nolte said. "Advice is paramount, not the transaction, regarding what people are willing to pay for these days. And scale helps."
The fee cuts, which apply to both individual investors and financial advisers using the Schwab platform, are expected to reduce quarterly revenue by between $90 million and $100 million, according to a statement from Schwab CFO Peter Crawford.
Even though commissions represent less than 4% of Schwab's total net revenues, the stock market reacted to the news immediately, driving down Schwab shares by nearly 10% in midday trading.
A bigger loser, however, was TD Ameritrade Holding, which saw its shares decline by nearly 23%. ETrade shares were down nearly 17% at midday, while the S&P 500 Index was down just46 basis points.
In response to a request for comment, TD director of corporate communications Becky Niiya emailed the following statement: "The news just came out. We're committed to delivering the best experiences for our clients. We have the best platforms, award-winning service and investor education, an extensive branch network, and the best price improvement in the industry. And, we will remain competitive."
While Schwab representatives did not comment beyond the press release, it is worth noting that the brokerage platform had $2.9 trillion under management in February 2017, when it cut commissions to $4.95 per trade; today, Schwab's assets total more than $3.7 trillion.
"This is big and the other platforms will have to address it," said Christian Magoon, chief executive of Amplify ETFs.
"The play is clearly for companies like Schwab to get more market share," Mr. Magoon said. "But it's really good for the industry and investors."
Bill Winterberg, founder of the fintech consulting firm FPPad, described Schwab's latest fee cut as a reaction to upstart competitors like Robinhood Markets, an aggressive brokerage app that has attracted more than four million accounts.
"This gives quite a bit of attention and recognition to the trend in commission-free trading," he said. "Some in the industry felt Schwab was the 800-pound gorilla that was not keeping up with trends, but this shows Schwab is not falling behind."
In a statement, Schwab president and chief executive Walt Bettinger made it clear the brokerage platform is planning to alter the landscape.
"This is our price. Not a promotion. No catches. Period. Price should never be a barrier to investing for anyone, whether an experienced investor or someone just starting on the investing path," Mr. Bettinger said in the statement.
[Recommended video: Schwab's Kleintop: What's next for the market?]
The free trading does not apply to foreign stock transactions, large block transactions requiring special handling, restricted stock transactions, transaction-fee mutual funds, futures, or fixed income investments, according to the company statement.
Schwab has more than 365 offices and 12.1 million active brokerage accounts, 1.7 million corporate retirement plan participants and 1.4 million banking accounts.