Businessman checking stock market online

Charles Schwab Corp (NYSE:SCHW) took an axe to the US discount brokerage sector on Tuesday as the firm unveiled plans to eliminate commissions for online trading of stocks, ETFs and options listed on US or Canadian exchanges.

In a statement released on its website, Schwab said it will reduce the commission it charges online to zero from $4.95 per trade, starting October 7.

The company said the decision to remove “the final pricing barrier to investing online” was being made in conjunction with the publication of ‘Invested’, the latest book from its founder and chairman Chuck Schwab.

Schwab himself said: “From day one, my passion has been to make investing easier and more affordable for everyone.”

“Eliminating commissions ensures my ultimate vision is realized – making investing accessible to all,” he added.

No  minimum account size

The company – which manages more than $3.7 trillion in client assets – said there was no minimum account size to open a full feature brokerage account, and added that every client using its web and mobile channels will automatically qualify for the new pricing, without opening a new account, making a new deposit or maintaining a minimum balance of any type.

The news put a dent in Schwab’s shares, which shed 9% to $38.05 in lunchtime trade in New York, albeit with the market under severe pressure today from disappointing US manufacturing data.

The Dow Jones Industrial Average tumbled almost 250 points, or 0.9% to 26,671, while the broader S&P 500 index shed 0.8%, and the tech-laden Nasdaq Composite lost 0.5%.

The September US ISM manufacturing report posted its worst reading for a decade, with the national factory activity index dropping 1.3 points to 47.8, well below economist’s expectations for a rise to 50.1. A reading below 50 indicates contraction.

Rivals suffer bigger falls

Schwab’s rivals posted much bigger falls, however, with TD Ameritrade (NASDAQ:AMTD and E*Trade (NASDAQ:ETFC) dropping 23% and 17%, respectively.

The move comes as firm’s like California-based startup brokerage Robinhood have been capturing market share from the established players in recent years by offering commission-free stock trades.

Commenting on the Schwab move in an email, Robinhood spokesperson, Jack Randall said: “The changes taking place across the brokerage industry reflect a focus on the customer that‘s been inherent to Robinhood since the beginning. We remain focused on offering intuitively designed products that reduce barriers to our financial system, including account minimums and commission fees.”

On Monday, Interactive Brokers Group also started offering commission-free, unlimited trades on US-listed stocks and ETFs.

Last summer, JPMorgan Chase & Co (NYSE:JPM) began offering free stock trades for self-managed accounts through its mobile banking app.

According to a Reuters report, Schwab made $139 million from selling its customers’ orders in 2018, up 22% from the previous year, according to a regulatory filing.

TD Ameritrade was paid $458 million for customer orders in its last fiscal year, up from $320 million the year before, also according to a filing, Reuters added.

 — Adds Robinhood spokesperson comment —

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