The online enabler is eliminating the $12.99 commission tier that infrequent traders were subjected to in the past. As of yesterday, all accounts will be paying no more than $9.99 for stock trades. High volume traders will continue to pay just $7.99 per trade.
E*TRADE is also doing away with account activity fees, including annual IRA fees.
It's no coincidence that E*TRADE is dolling up its commission schedule just days after Fidelity Investments answered Schwab's pricing war battle cry.
Your turn, TD AMERITRADE (Nasdaq: AMTD ) ?
Investors will love paying less for stock trades. Personally, it offended me that many discounters were penalizing infrequent traders. It sends the wrong message, turning patient investors into speculators. Do you think that Berkshire Hathaway's (NYSE: BRK-A ) (NYSE: BRK-B ) Warren Buffett would've recommended making the 150 trades in any given quarter to qualify for the $7.99 rate through Power E*TRADE accounts? I doubt it.
I get it. Discounters rely on hyperactive speculators and risk takers on margin to justify dirt cheap commissions. I just don't have to like it. Unfortunately for those who invest in the discounters themselves, lower commissions and the eradication of account fees will probably eat into their profitability.
Goldman Sachs probably saw this coming when it marked down its price targets on the three brokers -- as well as optionsXpress Holdings (Nasdaq: OXPS ) and TradeStation (Nasdaq: TRAD ) -- two months ago. Trading volumes are drying up so brokers are aggressively trying to win market share through attractive commissions.
Account holders will rejoice, but the bottom line on the battlefield won't be pretty.
What's that? You're still unsure about whether or not you should get a new broker? Get thee to our Discount Broker Center to learn more and compare some sponsored commission schedules.