I guess Charles Schwab (NASDAQ:SCHW) made losing some weight a New Year's resolution.

The leading discount broker is slashing commissions for its smaller and less active accounts. It will now charge a flat $8.95 per online trade for all clients, a price point previously reserved for clients with at least $1 million in household account balances or committing to at least 120 annual trades. Everyone else was paying at least $12.95 for stock and ETF trades.

Simplifying its commission schedule is good news for clients, though rivals E*TRADE (NASDAQ:ETFC) and TD AMERITRADE (NASDAQ:AMTD) can't be happy about it. No broker wants a price war, especially when the firms are suffering through a low interest rate environment that is eating into the earnings power of their money market funds.

With 7.7 million client brokerage accounts, it's not as if Schwab had any trouble attracting traders under its higher commission schedule. However, this remains a competitive industry. Web-based operators and niche-specific players including Interactive Brokers (NASDAQ:IBKR) and optionsXpress (NASDAQ:OXPS) have to provide competitive pricing, since they know the competition is just a mouse click away.

Schwab's move may also have been motivated by recent trading activity trends. Daily average revenue trades for November were 27% lower than the previous year's showing. The discounter also announced that it was taking a $108 million hit in fees waived on its money market products. In other words, maybe lower commissions will ignite renewed trading activity or move a little more cash off the sidelines.

It will be interesting to see how the others respond. No broker operates in a vacuum these days.  

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Longtime Fool contributor Rick Munarriz believes in self-service gasoline pumps and self-service stock brokerages. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.