E*Trade is the latecomer in the heated comptition of slashing trading prices. In a press release this Tuesday, it changed its original 3-tier price system to 5-tier, and cut the price across the board.
The new E*Trade pricing:
- Heavy Traders with 500+ trades/month: $6.99 per trade
- Heavy Traders with 50-499 trades/month: $7.99 per trade
- Heavy Traders with 5-49 trades/month: $8.99 per trade
- "Serious Investors" ($50,000 or more balance): $11.99 per trade
- "Main Street Investors" (less than $50,000 balance): $14.99 per trade
* Additional Per Options Contract Fee of $0.75-$1.75 applies.
E*Trade's price cut came after similar cuts by many online brokerage firms in the last couple of months, including:
- In January, Scottrade reduced limit order commission to $7, the same as market orders.
- Ameritrade launched new IZone service, a bare-bone service that offers $5 internet equity trades. (Ameritrade Streamer offered separately at $9.99/month.)
- Schwab, on February 8, cut base equity trade commission from $12.95, down from $19.95. This applies to accountholders with a balance between $50,000 ad $1 million. (Schwab cut the rate from $29.95 to $19.95 in November.)
- Within a week, Fidelity reduced its silver-level equity trade commission from $14.95 to $10.95.
I currently have the relationship with the following brokerage firms:
- One after-tax account with AmeriTrade, paying $10.95 per trade.
- One after-tax account, and one Roth IRA account with Fidelity, paying $8.00 per trade. (I gained the gold-level status because of employement -- Fidelity is the broker that operates Microsoft 401(k) and ESPP program.)
- One Roth IRA account with BrownCo (a subsidiary of JP Morgan), paying $5 per trade.
As I only trade a limited times every year, there is not much incentive for me to swap ship even the price war continues. After all, I believe frequent trading is a drain of performance for most people. To be eligible for E*Trade's most preferred pricing, one needs to pay out 500 * $6.99 = $3,495 commission a month, or $41,940 a year, as a minimal -- that's a very expensive 4.19% load even on a million-dollar portfolio.
(By the way, did I mention you can actually pay nothing for 20 online trades every month? Take a look at my discussion of Freetrade.)