Fidelity Investments Eliminates Commissions

October 11, 2019 | Investments, Liquid Alternatives, News

The broker joins rivals in slashing trading costs to zero

Fidelity Investments announced Thursday that it is eliminating commissions for stock trading. The elimination of commissions will also include exchange-traded funds (ETFs) and options. The firm is the latest in a long line that has cut fees to zero as the discount broker wars continue.

Fidelity Investments will officially cut those costs for its 21.8 customer accounts starting on November 4.

Last week, E*Trade Financial, Charles Schwab, TD Ameritrade, and Tradestation cut online trading commissions. It’s widely expected that the companies will look to make up the revenue by selling advisory services. The firms may also aim to increase order flow sales or expand new lines of business. Market makers like Virtu Financial that purchase order flow make a profit from the spread on the trading of shares.

Fidelity Investments Responds to Rivals

The news comes as discount brokers responded to Fintech startups like Robinhood. The $7.6-billion startup launched several years ago and allowed users to trade for free. However, the company has struggled to launch other financial services like savings and checking accounts. The move by discount brokers has raised concerns about Robinhood’s ability to maintain its stronghold with a Millenial crowd.

Earlier this week, UBS senior equity analyst Brennan Hawken told CNBC this week that Robinhood could start to lose its faithful customer base.

Hawken said the company’s customers are “not going to stay at Robinhood.” He went on to argue that firms like Schwab and TD Ameritrade have “trusted” brands with the same free benefits.

Finally, Robinhood spokesperson Jack Randall said the company is focusing on new products that can reduce costs and barriers in the financial industry.

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