Posted by Chuck on October 4, 2019
Brokerage Bonuses

Published on October 4th, 2019 | by Chuck

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Ally To Remove Commission On Stocks, ETFs & Options

Following on from announcements made by Charles Schwab, TD Ameritrade, and E*Trade, Ally Bank has announced that it will be removing commission on all online US listed Stocks, ETFs & Options. Options contracts will still be charged at $0.50 per contract (which is lower than Schwab, E*Trade, & TD who charge $.65). These changes will go into effect on October 9th, 2019.

I expect we’ll see everyone else follow along with this as well.



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SideShowBob233
SideShowBob233

Damn Fidelity get with the program. Don’t make me move all my money elsewhere.

Fidelity
Fidelity

You really want your order flow resold? Free trades aren’t free. Fidelity price improvement wins the day. I really hope they don’t give in.

Ben
Ben

How do you know they don’t resale currently and that they will resale Ovid they do change? I thought they are going commission free given that they are becoming less and less part of their revenue anyway. Plus, they are increasingly profiting on the deposited cash that gets loaned at at higher rates then what they pay on brokerage cash accounts.

BrokerMania
BrokerMania

Excess cash at Fidelity is auto swept into money market that earns a decent rate, around 1.5% recently. Cash is immediately available for trading, Fido is pushing this feature as a differentiator.

Mist Soalar

I’ve done ACAT twice this year already. Feels like laundering.

Celia
Celia
Bob Roberts
Bob Roberts

About time!!!

K.M.
K.M.

wow great ripple effect happening.

Amol
Amol

Wonder if Ally will now cancel the transfer bonus + free trades promo it began a week back.

SamL
SamL

The transfer bonuses are not new. They’ve been around for a while. Obviously the free trades are now redundant.

Amol
Amol

But until last week, I don’t think existing Ally Invest customers could take advantage of those.

SamL
SamL

Ally probably wishes they’d stuck with banking and didn’t buy that brokerage (TradeKing). It might be a liability now that they just want to sell.

Matt
Matt

Brokerages don’t make their money with commissions. Back in the 1980s and earlier, sure, commissions were a big part of a brokerage business. But that hasn’t been the case for a long while.

Charles Schwab, for example, generated around $100 million in commissions during its most recent quarter. That sounds like a lot, but it actually isn’t. It’s only about 4% of Schwab’s total net revenue.

Of course, Schwab would prefer to keep generating that $100 million each quarter. Of course. But what I’m saying its that it’s not a huge part of their overall business.

One of the secrets about brokerages is that if you called up and simply asked, they would often just throw free trades at you to keep you happy. 50 free trades here. 100 free trades there. It wasn’t a huge deal for them. They keep you happy with free trades and make their money with their percentage-fee services. Now those free trades are just the industry norm.

Matt
Matt

(Too late to edit my first reply to you.)

For Ally Bank specifically, they had to have known that a $0 trade world was approaching when Ally Bank purchased TradeKing in 2016. The industry — long before 2016 — had been trending towards the $0 trade being standard industry practice. Maybe they didn’t know it would happen specifically in October 2019, but they had to have known that this was an inevitability.

TomJ
TomJ

Except the whole free trade concept had been tried before and didn’t last very long. Several brokerages came and went using a free model or one that was extremely cheap.

I was fortunate when Ally bought MB Trading to be grandfathered into the MB commissions which were lower than Ally’s. I never thought we would see free trades again.

Matt
Matt

Several startups came and went using the free model. They went away not because of the free trades, but because they couldn’t make money on other products and services. These big brokerages don’t have that problem. They already make the vast majority of their money from things other than commissions. They make their money from services that charge percentage fees (rather than a flat $5 for a trade).

Peter
Peter

Yay for me having just spent $4.95 with Fidelity yesterday…

Matt
Matt

If you wanted to, you could call up Fidelity and likely get them to refund that $4.95. I don’t know how big of a deal it is for you, but they’ll likely refund it if you call. Even before this, brokerages handed up free trades like candy to anybody proactive enough to call and ask for them.

BrokerMania
BrokerMania

TradeStation and interactive brokers (lite) have also removed commissions.

Yidong Ren
Yidong Ren
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