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Fidelity On The Offensive Again

Contributed by mm | September 21, 2004 7:46 AM PST

WSJ reported today that Fidelity is announcing new commission schedule for bond tradings. In the new structure (available at Fidelity web site), Fidelity will charge:

(each bond usually has a face value of $1,000)
- $1 per bond for US Treasury securities,
- $2 per bond for US Government Backed Securities,
- $3 per bond for Municipal Bonds,
- $4 per bond for Corporate Bonds, and
- $5 per bond for Mortgage Backed Securities, Asset Backed Securities and Other Securities

With this new schedule, Fidelity undercuts low-cost leader AmeriTrade, which charges $5 per bond for the first 50 bonds and $2.50 thereafter with a minimum commission of $40.

As the same WSJ mentioned, fixed income market is highly fragmented with very limited price transparency and most brokers earn 2% markup/markdown in a roundtrip transaction. Pledging not to mark up bonds beyond the commission, Fidelity is working toward more efficiency in the market for retailer customers, which is definitely a good thing.

(P.S. The article also mentioned Fidelity might purchase marked-up bonds from other brokers -- not sure if "soft money" will come to play.)

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