Fidelity Reduces Trading Commission and Offers Commission-Free iShare ETFs

This is what competition is about.

Early last month, Charles Schwab reduced the commission for online equity trading to $8.95 per trade from the original price of $12.95. The move, as an recent article on Barron’s noted, could trigger a new price war in online trading. Now, there’s a strong evidence that the war may have indeed started after mutual fund giant Fidelity announced today that it’s also cutting online trading commission and offering commission-free trade of iShare ETFs to its customers through its brokerage unit starting February 3, 2010.

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Effective tomorrow, the new commission for online equity trades is $7.95 per trade, regardless the number of shares and trading frequency. The new price is lower than what Schwab charges for online stock trading and only slightly higher than discount broker Scottrade’s equity commission (currently at $7.00/trade).  Meanwhile, Fidelity also said today that it will offer commission-free trade of 25 iShare ETFs through Fidelity.com, Active Trader Pro, Wealth-Lab Pro, or through Fidelity’s wireless channels. iShare ETFs that are eligible for commission-free trades cover three categories: domestic equity index funds, international equity funds, and fixed income funds.

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U.S. Equity Index Funds

  • Russell 1000 Growth (IWF)
  • Russell 1000 (IWB)
  • Russell 1000 Value (IWD)
  • Russell 2000 Growth (IWO)
  • Russell 2000 (IWM)
  • Russell 2000 Value (IWN)
  • Russell 3000 (IWV)
  • S&P 500 Growth (IVW)
  • S&P 500 (IVV)
  • S&P 500 Value (IVE)
  • S&P Mid Cap 400 Growth (IJK)
  • S&P Mid Cap 400 (IJH)
  • S&P Mid Cap 400 Value (IJJ)
  • S&P Small Cap 600 Growth (IJT)
  • S&P Small Cap 600 (IJR)
  • S&P Small Cap 600 Value (IJS)

International Equity Index Funds

  • MSCI ACWI (ACWI)
  • MSCI EAFE (EFA)
  • MSCI EAFE Small Cap (SCZ)
  • MSCI Emerging Markets (EEM)

Fixed Income Funds

  • Barclays Aggregate (AGG)
  • Barclays TIPS (TIP)
  • iBoxx $ Investment Grade Corporate (LQD)
  • JP Morgan USD Emerging Markets (EMB)
  • S&P National AMT-Free Municipal (MUB)

Now that both Schwab and Fidelity have lowered their stock commissions and offered some extra for free for their customers, I hope that other discount brokers, especially Scottrade which has the closest commission to that of Fidelity, will also do something similar to reduce trading cost. Will that happen? I don’t know. But if more firms join Schwab and Fidelity to lower their trading fees, discount brokers will feel the pressure and that will be good news for us :)

Photo credit: Kongharald

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