Schwab said it would cut its online commission fees on U.S. stocks, exchange-traded funds and options from $4.95 to zero, starting on October 7. Schwab had previously cut commissions twice in 2017, lowering costs from $8.95 to the current level. The group said today's move would mean a loss of between $90 million and $100 million in quarterly revenues, a figure that translates to around 3% to 4% of total group revenues.
"Price should never be a barrier to investing for anyone, whether an experienced investor or someone just starting on the investing path," said CEO Walter Bettinger. "We're proud to provide clients with a full-service, modern investing experience that delivers on our no trade-offs combination of service, simplicity and superior value - backed by a satisfaction guarantee."
Charles Schwab shares were marked 9.6% lower at $37.82 each at the start of trading Tuesday following the commission cut, with rival E*Trade Financial Corp. (ETFC) - Get Report slumping 18.24% to $35.73 each.
TD Ameritrade (AMTD) - Get Report , meanwhile, was marked 22% lower at $36.39 each and on pace for the biggest single-day decline since January 2006. Interactive Brokers Group (IBKR) - Get Report , which cut its own commissions to zero last week, fell 9% to $48.95 each.
Schwab's move follows its purchase of the managed portfolio accounts of USAA Investment Management Co for $1.8 billion earlier this year, alongside an agreement to become the group's exclusive wealth management and brokerage provider.
Schwab earns around 8% of it revenues from trading commissions, with the bulk coming from the net interest margin it gleans from cash held in customer accounts. Its second quarter net interest margin was 2.5%, the company said earlier this summer, down 6 basis points from the previous three month period.