Charles Schwab Ending Online Trading Commissions on U.S.-Listed Products

By Colin Kellaher and Allison Prang

Charles Schwab Corp. said it would eliminate commissions on trades made on its mobile and web channels, rattling the online brokerage industry.

Shares of brokerage companies E*Trade Financial Corp. and TD Ameritrade Holding Corp. fell by 16% and 20% respectively after the market opened Tuesday. The move also sent shares of Charles Schwab down fell 6.2%.

The change applies to commissions for stocks, exchange-traded funds and options listed on U.S. or Canadian exchanges. The San Francisco financial-services company currently charges a commission of $4.95 for online U.S. stock, ETF and options trades.Charles Schwab said clients trading options will continue to pay 65 cents per contract.

Charles Schwab said the move, which is effective Oct. 7, is aimed at making online investing more affordable. It noted that new firms entering the market often use zero or low commissions as a lever.

"We don't want to fall into the trap that a myriad of other firms in a variety of industries have fallen into and wait too long to respond to new entrants," Chief Financial Officer Peter Crawford said in a note on the company's website. "It has seemed inevitable that commissions would head towards zero, so why wait?"

Keeping services less-costly for customers has been a focus of Schwab's. The company has also tried to make financial planning cheaper for customers.

Charles Schwab said the pricing reduction is equivalent to about $90 million to $100 million in quarterly revenue, which roughly translates to 3% to 4% of total net revenue. However, the firm said its commissions per revenue trade have been falling for several years, "so the potential revenue impact in coming quarters could very well be smaller."

Others in the industry have moved to make trading free of fees. Last year, JP Morgan Chase said it would give customers 100 free stock or ETF trades.

Write to Colin Kellaher at colin.kellaher@wsj.com and Allison Prang at allison.prang@wsj.com

(END) Dow Jones Newswires

October 01, 2019 10:05 ET (14:05 GMT)

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