Race To Zero


Oct 05, 2019



Oct 05, 2019



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!

Portfolio News

What traditional lenders can learn from Sears & Walmart - Portfolio company Ocrolus reviews how start-ups have led the back-end digitization of lending, and explores whether the incumbents will follow suit in the coming years. Read more

TradeBlock's the Hard Fork – weekly cryptocurrency market commentary - TradeBlock research covers Bakkt's tepid market open for physically settled Bitcoin futures, the launch of Binance's staking services, and the return of price volatility post Bitcoin's big drop below $10k. Read more

'Bank on it' podcast with Matt Miller - The founder and CEO of Embroker, Matt Miller, chats with John Siracusa about his journey from inception in starting a digital commercial insurance broker which helps SMBs understand their risk and pricing. Read more

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

Industry News

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

Select Financings

Atom Finance - New York based investment research platform has raised $10.6m Series A funding led by General Catalyst. Read more

Dave ­- Los Angeles based consumer lending and overdraft protection startup has raised a $50m Series B from Norwest at a $1b valuation. Read more

Digit - The San Francisco based personal finance and savings app has raised $27.5m in a Series C funding led by General Catalyst, with participation from Financial Venture Studio and Citi Ventures. Read more

Fyle - India-based expense management platform raised $4.5 million in funding with participation from Steadview Capital, Tiger Global, Freshworks, and Pravega Ventures. Read more

InstaDApp - India based smart contract DeFi wallet has raised $2.4m in Series Seed capital from Pantera, Coinbase Ventures, Robot Venture, and IDEO. Read more

Lex - New York-based commercial real estate securities marketplace available to retail investors raised $4 million in Series Seed funding form Greycroft and Thor Equities. Read more

Mercury - San Francisco-based bank for startups raised $20m in Series A funding led by Charles River Ventures with participation from A16z. The post-money valuation is estimated to be $100m. Read more

nCino - North Carolina based cloud-based operating system for financial institutions has raised $80m in a funding round led by T Rowe Price, with participation from Salesforce Ventures. Read more

Rapyd - London based fintech infrastructure platform has raised a $100m Series C led by Oak HC / FT. The company's valuation is "approaching $1b." Read more

SKALE - San Fransisco based blockchain scalability platform has raised $17.1m in capital led by prominent crypto investors including Arrington XRP Capital, ConsenSys Labs, Multicoin Capital, and Winklevoss Capital. Read more

Skew - London based crypto derivatives startup has raised $2m Series Seed from Kleiner Perkins with participation from Seedcamp, First Minute Capital, and Kima Ventures. Read more

Teampay - New York based provider of distributed spend software has raised $12m Series A led by Tribe Capital. Read more


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