E*Trade Becomes Latest Online Brokerage to Cut Commissions

By Imani Moise

E*Trade Financial Corp. joined the pricing war among online brokerage companies Thursday, as the company laid out plans to cut its commissions, sending the cost to trade online to a new low.

The discount broker said trade commissions will fall to $6.95 from $9.99 for most customers. The company also will introduce a lower pricing tier for its most active customers, or investors who make more than 30 trades a quarter, of $4.95. Previously, traders needed to make more than 150 trades per quarter to be included in the tier.

For active customers, options charges will be 50 cents a contract, below the 65 cents offered by Fidelity Investments and Charles Schwab Corp.

E*Trade's stock dropped 7.2% on Tuesday as rivals Fidelity and Schwab said they were lowering online trade commissions to $4.95 from $7.95 and $6.95, respectively.

E*Trade shares extended losses on Thursday, falling 2.1% in early trade.

Commissions accounted for 23% of the firm's revenue last year, down from 31% in 2015.

The price cuts are a way for brokerages to capture growing sums of money flowing into exchange-traded funds, lower-cost products that track the performance of a basket of securities but trade on exchanges like stocks.

Asset-management firms that provide the funds brokerages sell have been equally aggressive about pulling down fees. In some cases, that means the cost of investing is tumbling toward zero.

By the end of 2015, the most recent year for which data are available, 348 mutual funds and ETFs tracked by Morningstar Inc. charged investors 0.1% or less, up from 125 such funds five years earlier.

Write to Imani Moise at imani.moise@wsj.com

(END) Dow Jones Newswires

March 02, 2017 10:35 ET (15:35 GMT)

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