This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Pricing Wars Weigh on Broker ETFs

NEW YORK ( TheStreet) -- ETF Investors interested in online brokerages have two ways of gaining exposure to the industry, with iShares Dow Jones U.S. Broker Dealers Index Fund (IAI) the slightly better choice over SPDR KBW Capital Markets (KCE) right now.

IAI has a greater allocation than KCE to Internet broker companies, with 20.6% of the holdings of IAI falling into this category and 16.8% of KCE's. Although investors should note that these fund are hardly pure plays on Internet brokers, their allocation to the sub-sector is strong enough to influence the funds.

A big reason for the difference in online brokerage exposure between the funds is that KCE has no allocation to E*Trade Financial (ETFC - Get Report), while the company accounts for 3.6% of IAI.

Although small, the allocation to E*Trade contributed to IAI's recent underperformance of KCE. Year to date, ETFC declined by 15.3% and helped IAI fall by 9.5%, in comparison to KCE's decrease of only 8.5%.

The latest developments in the industry have been price cutting. E*Trade recently lowered its highest trading fees from $12.99 to $9.99 in the latest installment of an online brokerage price competition, a response to Fidelity's recent drop in its per-trade commission from $19.99 to $7.95. Although ETFC went up on the news of its own fee reduction, price wars are rarely constructive for the parties involved.

Customers may enjoy trading more freely with lower fees, but it could hurt the bottom line of online brokers and another round in this price war would not reflect well on these ETFs.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
IAI $42.65 -0.44%
KCE $50.27 -0.08%
AMTD $36.64 -1.70%
ETFC $28.38 -0.61%
SCHW $29.81 -2.10%


DOW 17,678.23 -97.89 -0.55%
S&P 500 2,057.64 -10.25 -0.50%
NASDAQ 4,863.3310 -37.5540 -0.77%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs