ETF Firms Hit by E-Broker Price War
October 08 2019 - 10:25AM
Dow Jones News
By Alexander Osipovich
Online brokerages aren't the only Wall Street firms jolted by
Charles Schwab Corp.'s decision last week to eliminate commissions
on stock trades.
Exchange-traded fund providers, such as BlackRock Inc., have
also been hit by fallout from the e-broker price war, which
escalated in the days after Schwab's decision as rivals such as TD
Ameritrade Holding Corp. cut their own commissions to match.
Shares of BlackRock, the New York-based asset-management giant,
fell 5% from their closing price on Sept. 30, the day before
Schwab's announcement, through Monday. Over the same period,
Invesco Ltd. slumped 5.45% while WisdomTree Investments Inc. slid
7.1%, underperforming the S&P 500, which dropped 1.3%.
The reason? Analysts point to arrangements that the ETF
providers have signed in recent years with Schwab, TD Ameritrade
and other online brokerages, which allow hundreds of their ETFs to
be traded commission-free on those brokers' platforms.
On March 1, for instance, Schwab doubled its lineup of
commission-free ETFs, including more than 80 new additions from
BlackRock's iShares family of ETFs. Dozens of WisdomTree and
Invesco ETFs were also added to Schwab's "OneSource" program, which
offers a menu of mutual funds and ETFs that can be traded without
commissions.
That might have helped steer investors into the funds back when
Schwab charged a standard $4.95 commission for stock and ETF
trades. But since Schwab said it was slashing those commissions to
zero -- a move quickly copied by TD Ameritrade and E*Trade
Financial Corp. -- the value of having one's ETF included in such a
list has evaporated.
BlackRock and Invesco declined to comment. A WisdomTree
spokeswoman wasn't immediately available to comment.
Schwab's OneSource program for ETFs has been effectively
discontinued with the move to zero commissions, a spokeswoman for
the brokerage said. A TD Ameritrade spokeswoman declined to comment
on the company's relationships with ETF providers.
There is no readily available data on the share of ETF inflows
driven by such commission-free deals, and the details of the
agreements between e-brokers and ETF providers are generally
nonpublic. What's clear is that the repercussions of the e-broker
price war are still playing out, analysts at UBS Group AG said in a
research note on Monday. "There is still a great deal of
uncertainty and many more shoes to drop," they said.
Write to Alexander Osipovich at
alexander.osipovich@dowjones.com
(END) Dow Jones Newswires
October 08, 2019 10:10 ET (14:10 GMT)
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