Charles Schwab
Zero commission rates for trading stocks, ETFs and options listed on U.S. and Canadian exchanges. It will also eliminate commissions on online over-the-counter stock trades, but the standard $50 foreign transaction fee still applies. All domestic retail brokerage accounts other than Schwab One Organization accounts are eligible for the commission-free trading regardless of account size.
TD Ameritrade
Zero commission rates on online trades of U.S. exchange-listed stock, ETF and options trades. No account minimum applies. There will be no limits on commission-free trades, but the standard rules will apply to day-trading on margin.
E*Trade
Zero commission rates for online U.S.-listed stock, ETF and options trades. It also plans to cut its options contract charge—a premium buyers pay to sellers—to 65 cents per contract while maintaining its active-trader pricing at 50 cents per contract.
Interactive Brokers Group
Zero commission rates for trades of U.S.-listed stocks and ETFs on a new “lite” version of its trading platform, which offers a simplified trading experience for less-active traders. There is no account minimum.
Fidelity
Zero commission rates for online U.S.-listed stock, ETF and options trades, plus 65 cents per contract on options.
Merrill Edge
Its self-directed program will expand its zero-dollar online trades, which were limited and varied in number by customer segment. Now it will offer unlimited commission-free trades of stocks, ETFs and options for self-directed clients who are also enrolled in the bank’s Preferred Rewards, a program that gives clients additional benefits — like rewards on credit cards or preferential interest rates — for using multiple products and services at the company.
Does this mean trading is free?
Trading won’t be free in all cases. Schwab will still charge a commission for trading foreign stocks and fixed-income investments. Additional fees may apply if a Schwab client wants assistance when trading large blocks of stocks, typically 10,000 shares or more of illiquid securities.
Service charges of $25 and $5, respectively, will still apply for trades placed through a broker or by automated phone. Though Schwab does not generally charge a withdrawal fee, fees may apply if a client wants funds wired out of their account the same day.
Schwab and TD Ameritrade will also continue to levy a 65-cent fee per options contract.
At TD Ameritrade, a $6.95 commission applies to trades of over-the-counter stocks. IBG also will charge a commission on OTC stocks.
What are some pitfalls for investors?
Commission-free trading could tempt some investors to trade more frequently, which could prove detrimental to their returns through untimely trades and potentially higher tax bills on short-term holdings.
Brokerages could also offset some of the losses from commissions by increasing charges that are less transparent to investors or dipping into their pockets in other ways. For example, consumers may save on commissions but earn less on the cash in their brokerage accounts. Brokerages earn money by borrowing from account holders and lending to others at a higher interest rate, and they could adjust the interest paid to help negate free trading.
There are other ways for brokerages to recoup their losses. When an investor buys or sells a stock, for example, he usually pays more or receives less than the stock’s prevailing price. That’s because market makers, the trading firms that handle the trades, are compensated. This difference is known as the bid/ask spread. To make up for revenue lost from commissions, brokerages could route trades in a way that leads to wider spreads.