Another price war may be breaking out in the online brokerage sector.

Charles Schwab

(SCHW) - Get Report

, the nation's largest discount brokerage, fired the first shot in the latest skirmish by announcing Wednesday that it was reducing some commission trading fees. The San Francisco-based broker says it is reducing its maximum fee on many stock trades to $12.95, down from $19.95.

The basic commission charge stays at $9.95. The broker says it's also eliminating a number of service fees, including charges for ATM withdrawals, various checking services and electronic bill payments.

In early trading, shares of Schwab were up 30 cents, or 2%, to $14.88.

A year ago, the online brokers were involved in a tit-for-tat price war, to see which firms could slash trading costs the most in a bid to attract customers and drive trading. Schwab's newest fee reductions could spur

E*Trade Financial

(ET) - Get Report

and

TDAmeritrade

(AMTD) - Get Report

to respond in kind, especially since there's indication that some online customers already may be jumping out of the market.

For instance, E*Trade Financial said on Wednesday that its customers made fewer trades in May, the month the markets began to tumble. It says daily average revenue trades fell by 3% in May from the April tally. E*Trade also said customer assets fell 5% in May to $184 billion.

By contrast, Schwab says customer trading rose 3% in May.

In morning trading, shares of E*Trade were down 88 cents, or 4%, to $19.74. Ameritrade was down 50 cents, or 3%, to 3.5%.

Investors appear to fear that a combination of lower fees and reduced trading levels could squeeze profits at some online firms, if the market selloff continues.