TD Ameritrade fires back at Schwab by cutting commissions to zero

After seeing its stock price drop 25%, TD charges headlong into the latest low-fee battle.
OCT 01, 2019
Just 10 hours after Charles Schwab announced it was eliminating trading commissions on U.S. stocks, exchange traded funds and options starting Oct. 7, rival TD Ameritrade Holding Corp. upped the ante by cutting the same commissions starting Oct. 3. TD's announcement late on Tuesday, which mimics the Schwab news right down to the 65-cent option contract fee, followed a day that saw the company's stock price lose 25.8% in a market reaction to anticipated reduced commission revenue. A TD spokesman responded via email Tuesday evening that the company is not accepting interview requests, but a statement from president and chief executive Tim Hockey suggested TD is not backing down from Schwab's low-fee challenge. "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," Mr. Hockey's statement reads. "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." With approximately 25% of its total revenue coming from commissions, TD is viewed by analysts as being particularly vulnerable to a commission price war. Etrade Financial Corp., which derives about 18% of its revenues from commissions, saw its stock price fall more than 16.4% on the Schwab announcement. At Schwab, meanwhile, where commissions represent about 4% of total revenues, the stock price lost 9.7% on a day that saw the S&P 500 Index drop by 1.2% "Every time commissions get cut there's a similar reaction, and each time the reaction is proportionate to the impact on commission revenues," said equity analyst Cathy Seifert of CFRA, when discussing the Schwab announcement prior to the TD announcement. "ETrade and TD will be forced to counter the commission-free trades," she prophetically added. Josh Brown, financial adviser and chief executive of Ritholtz Wealth Management, also predicted earlier Tuesday that "commission rates are going zero anyway." "I would be shocked if Schwab didn't have a response by the end of the year," he added.

Latest News

SEC bars ex-broker who sold clients phony private equity fund
SEC bars ex-broker who sold clients phony private equity fund

Rajesh Markan earlier this year pleaded guilty to one count of criminal fraud related to his sale of fake investments to 10 clients totaling $2.9 million.

The key to attracting and retaining the next generation of advisors? Client-focused training
The key to attracting and retaining the next generation of advisors? Client-focused training

From building trust to steering through emotions and responding to client challenges, new advisors need human skills to shape the future of the advice industry.

Chuck Roberts, ex-star at Stifel, barred from the securities industry
Chuck Roberts, ex-star at Stifel, barred from the securities industry

"The outcome is correct, but it's disappointing that FINRA had ample opportunity to investigate the merits of clients' allegations in these claims, including the testimony in the three investor arbitrations with hearings," Jeff Erez, a plaintiff's attorney representing a large portion of the Stifel clients, said.

SEC to weigh ‘innovation exception’ tied to crypto, Atkins says
SEC to weigh ‘innovation exception’ tied to crypto, Atkins says

Chair also praised the passage of stablecoin legislation this week.

Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest
Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest

Maridea Wealth Management's deal in Chicago, Illinois is its first after securing a strategic investment in April.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.