Charles Schwab, TD Ameritrade and E-Trade have all announced zero commissions for stock and EFT trades.
While commissions have been driven down dramatically over the years, it is difficult to believe that these online brokers are actually going to lose money every time a customer buys or sells a security. At the same time, it does not appear that retail commissions are a significant portion of their revenue – but protecting the client base is important.
According to CNN.com, E-Trade said that it expected a quarterly revenue hit in the current quarter of approximately $75 million as a result of the commission eliminations. NPR is reporting that TD Ameritrade’s chief financial officer, said in a statement that the move to eliminate commissions will cost his company between $220 million and $240 million per quarter, or about 15% to 16% of revenues.
Watch for SEC and FINRA reviews and investigations in to best execution and fair pricing to rise in the coming year.