Zero commission is sapping investor interest in brokerage shares
An intense price war is going on in the UK & US brokerage sector.
ETrade, following Charles Schwab and TD Ameritrade, is charging $0 for trades in stocks and exchange-traded funds (ETFs). This move will cost the company an estimated $75 million in its second-quarter earnings.
Understandably, investors gave the stock a thumb down. E-Trade, with the ticker ETFC, plunged to new 52-week lows. Meanwhile, Charles Schwab (SCHW) also exhibited a similar price trend, with prices sliding into the $40 major round-number support.
One of the reasons behind this zero commission war is to protect themselves against upcoming brokers like Robinhood, which are luring customers with zero commissions.
Jackson Wong, Good Money Guide analyst comments: "I am watching this fight with great interest because developments there tend to ripple across the Atlantic sooner or later."
We have been highlighting (free stock trading here to stay & IBKR Lite) some of the on-line brokers that charges zero commission for certain trades, such as Freetrade, which, according to its funder Adam Dodds, is the first company to 'brings free, frictionless stock investing to the UK and Europe for the first time ever'.
Jackson Wong, Good Money Guide analyst comments: I suspect the downward pressure on trade commission will only grow over time.
On the price of major UK stockbrokers, Jackson Wong, Good Money Guide analyst comments: "These developments will probably exert substantial pressure on many UK established brokers, such as Hargreaves Landsdown (HL/). Its share price is flirting with a major breakdown below 1,850p (https://goodmoneyguide.com/zero-commission-is-sapping-investor-interest-in-brokerage-shares/)."
Notes for editors:
Jackson Wong, has over 10 years experience as a financial analyst. Previously a director of Stockcube Research as head of Investors Intelligence providing market timing advice and research to some of the world largest institutions and hedge funds.
His expertise include: Global macroeconomic investment strategy, statistical backtesting, asset allocation, and cross-asset research.
Jackson has a PhD in Finance from Durham University.
About Good Money Guide:
The Good Money Guide is a comparison site for investments accounts and services. Through in-depth expert reviews, client reviews, interviews, news and views we aim to connect clients to the most appropriate financial service provider for their needs.
The Good Broker Guide was founded in 2015 by Richard Berry and changed it's name to Good Money Guide in 2018 to cover a wider variety of financial service providers. Richard has been a broker for 20 years most recently at Investors Intelligence and previously a multi-asset derivatives broker at MF Global (Man Financial). Richard started his career working as a private client stockbroker at Walker Crips and Phillip Securities (now King and Shaxson) after interning on the NYMEX oil trading floor in New York and London IPE in 2000.