Schwab, E*Trade, and TDAmeritrade have joined the increasing ranks of discount brokerages that have cut trading commissions altogether. For E*Trade, the maneuver will immediately eradicate $300m in annualized revenues.
Since Interactive Brokers made the move in late September, all of these companies' stocks have taken a beating. TDAmeritrade is down by roughly 33%, while E*Trade and Schwab are down by 20% and 13% respectively.
This trend has been a long time coming - gradually at first, and now all at once. Robinhood got the ball rolling several years ago, but since last year incumbents such as Vanguard, JP Morgan, and Fidelity have eliminated fees and commissions across a broad range of products. Schwab, the market leader, accelerated panic this week for the investors in all of these competitors.
How will these brokerages try to make up for the lost revenue? First, we remind readers that free trading isn't really free - with the brokers paid for order flow on the back-end. In addition, these companies are re-orienting towards advice (and AUM fees) - with offerings that range from simple robo advisors to human financial advisors.
While investors in Schwab, TD, and others might be feeling some pain right now, traders everywhere are thumping their chests!
Race To Zero
Schwab triggers online-broker bloodbath as price war deepens - Shares of the biggest online brokerages plummeted this week after market leader Charles Schwab announced plans to eliminate commissions for U.S. stocks, ETFs, and options. Read more
Schwab’s next target? your financial adviser - Discount brokers are losing revenue from commission-free trading. The predictable result is that custodians, and even some mutual fund companies, are keen on getting closer to clients. Read more
The financial sector has seen enough innovation theatre - The FT explores the innovation theatre and inherent conflict of banks replicating each other (in the way only non-innovative institutions can) by creating labs, hubs, and accelerators for start-ups to set up shop. The quid pro quo was clear: the start-ups received office space, the banks got the ideas. Read more
Visa, Mastercard, others reconsider involvement in Facebook's Libra network - Visa, Mastercard, and other financial partners that signed on to help build and maintain the Libra payments network are reconsidering their involvement following a backlash from U.S. and European government officials. Read more
Will bots replace humans in active equity investment? The FT explores how machine learning will implement quant analysis to find the right stocks. Read more
Vanguard to challenge banks’ grip on $6t currency market - Vanguard is testing a new blockchain based platform that will allow it and other asset managers to trade currencies and avoid the big investment banks. The platform has apparently been operational for two months and has handled some trades. Read more
Block.one’s SEC settlement over EOS ICO is “shockingly weak” say critics - The company behind EOS paid just over $24m to the SEC on a token sale that raised $4b. But will the small beans settlement bring back to life the ICO market which raised $22b or the subsequent IEO offering that raised $1.6b? DeCrypto says not so fast. Read more
Harbor’s regulatory wait ends as FINRA awards broker-dealer license - The move is a sign the digital asset industry is maturity and breaks a long standoff between over 40 aspiring crypto broker-dealers and US regulators who approve them. Harbor can now handle key processes such as performing due diligence. Read more
The Amazon of 2030 - Interesting thought piece in the Institutional Investor that highlights while the price of crypto assets has bounced around, technological and infrastructure development has continued apace — akin to the business activity at Amazon after the Internet bubble burst. Read more
Cryptocurrency exchanges including Coinbase to rate digital assets - The association administering the ratings includes exchange operators Coinbase, Kraken, Circle, and Bittrex - the scale will be 1 to 5, with a 1 denoting NOT a security (Bitcoin) and a 5 signifying a token is a security that unregulated crypto firms can’t issue, sell, or trade. Read more
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