When I did the discount broker comparison post last year, I singled out a few brokers, that don’t belong to the group mainly because of the commissions they charge for trading stocks, even though some are quite popular. One of brokers that was not included is optionsXpress, which had a commission as high as $14.95 for online stock order, while a handful of *true* discount brokers charge $5 or less to buy or sell stocks. Despite the high cost of trading stocks with optionsXpress, I do have an account with it, one that I opened nearly three years ago when the broker offered a $100 bonus for a new account (optionsXpress is offering the $100 bonus right now), not because of its other tools such as mobile trading platform and stock research tools that I later found out to be quite helpful. Without the incentive, I don’t think I will ever get an account from a broker that charges $14.95 commission, no matter how many fancy tools it has.
After seeing some full services brokers like Fidelity, Vanguard, and Schwab aggressively cutting stock and ETF commissions recently, I was wondering how long it will take before optionsXpress and E*Trade ($12.95/trade) lowers their commissions in order to compete with others. Unlike E*Trade, which also operates a consumer banking unit, OptionsXpress seems to be only in the brokerage business. If they keep charging the ultra-high commission, how is it going to attract new customers when there so many cheaper, and maybe even better, alternatives available?
Well, it looks like optionsXpress has indeed felt the pressure because on July 1st I got an email from the broker announcing the new commission for stock, ETF and mutual fund trades. According to the new pricing schedule, trading up to 1,000 shares of stocks/ETFs will cost investors $9.95 per trade and shares above 1,000 will cost an additional 1 cent per share. Buying and selling mutual funds will cost the same $9.95 per order for no-transaction fee funds (additional fees will apply for funds with other fees or loads). While the new commission rates, now more than 30% lower than the original ones, are good news for existing customers, they are still too high to complete with other discount brokers with commissions as low as $2.95 (OptionsHouse) in my opinion. I doubt the number of new customers optionsXpress adds after the commission cut will be significant.
Now with the lowered commission, are you going to give optionsXpress a try?
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