
Schwab Removes U.S. Stock, ETF and Options Commissions - prostoalex
https://pressroom.aboutschwab.com/press-release/corporate-and-financial-news/conjunction-chuck-schwabs-new-book-invested-schwab-remove
======
whalesalad
As a side note I use Schwab as a checking account and it’s incredible. Zero
fees. Reimbursement of ATM fees. Easy overdraft protection from the brokerage
account. I love them as a bank.

This is even more reason to love them.

I’ve used Chase, Citi, was a Simple customer for a long time... and Schwab
blows all of them out of the water.

~~~
StevePerkins
Similar story with Fidelity.

Honestly, I just don't understand why people bother with traditional banks at
this point. Pretty much all of the major brokers offer cash management
accounts that are equivalent of online banking. Pretty much all with standard:

\- No fees

\- No minimum balance

\- Free checkwriting (usually free physical checks for that matter!)

\- ATM fee reimbursement (at least anywhere in the U.S., if not
internationally too)

\- Free debit cards

\- Direct deposit

\- Deposit paper checks by taking a picture with a phone app, etc etc etc.

The only possible downside that I can think of is that I'd have to deal with a
little extra hassle if I wanted a cashier's check. But even then, it would
simply take an extra day or two. And it's not like I'm closing on a new home
purchase all that frequently.

Nevertheless, people that I talk to get weird and SCARED when I talk about it.
Even my wife keeps a separate checking account at a physical bank, because she
just likes knowing that a brick-and-mortar building is there. I don't get it
myself, but human nature can be odd when it comes to money.

~~~
ggm
_The only possible downside that I can think of is that I 'd have to deal with
a little extra hassle if I wanted a cashier's check._

Almost everything wrong with consumer banking in america is contained, or
stems from the ability to refer to cheque as a neccessary and normal thing in
modern day finance.

I tore up my last cheque book ten years ago, I have had to resort to Western
Union three times now (once a year) to send money to Her Majesties Customs and
Excise for my UK pension topup, its the only thing I still do that way, and if
the UK stopped using a closed-loop domestic clearing house and opened up SWIFT
I'd do this via the IBAN immediately.

Cheques are cool. They're also horrendously stone age and the "yes but..." are
the collected history of insanity that is american banking.

Jimmy Stewart, holding the fort at the friendly credit union on christmas
day...

~~~
RhysU
Check != Cashier's check

The former is what you're describing. The latter is where the bank takes the
funds from you then itself guarantees the piece of paper. Much more like an
arbitrarily denominated bit of cash often used in large transactions in the
States when (1) a seller doesn't trust the buyer too much or (2) the seller
wants the funds to clear more quickly.

Also, regular checks are great. There's something about having to physically
take time to spend money via a goofy little ritual that makes it easier to
save the stuff.

~~~
ggm
Cashier's cheques are needed in the US because of fundamental distrust between
financial institutions. Funds clearing more quickly... Because the process is
locked to physical paper moments and could be milliseconds but no because
cheques.

If there is so much distrust between buyer and seller,why hasnt western
financial civilization in europe tanked by now?

I get cashier cheques aren't personal cheques but the underlying logic of why
they exist is because of legacy reasons which are inefficient and reinforce
bad behaviours.

~~~
unclesams-uncle
When I bought my apartment in Spain, I had to get a Cashier's check for both
the deposit and the final purchase.

There's apparently still some utility in them in parts of Europe. When I
challenged it (I had to pay 80 EUR for the check!) I was told that a bank
transfer could be reversed or canceled, and that Cashier's checks prevent that
from happening.

I don't see this situation changing until the banks get together with the
central bank and create a unified escrow system to replace Cashier's checks.

As of now, they don't see the benefits of changing to a new system outweighing
the costs.

------
maliker
Probably a good time to mention this* excellent piece on how they make money.

In short: it’s interest on cash deposits. Not payment for order flow.

* [https://www.kalzumeus.com/2019/6/26/how-brokerages-make-mone...](https://www.kalzumeus.com/2019/6/26/how-brokerages-make-money/)

~~~
H8crilA
And probably also a lot on short fees on the securities they lend out. Cheap
brokers lend out the securities you own to short sellers, short sellers have
to pay interest for such privilege (there's essentially an OTC market for the
% rate). Note that this is not much different from earning interest on lending
out cash.

Respectable brokers pass at least some of the short fees to the investor.
Interactive Brokers, which I use, pays back around 50%.

~~~
gibybo
This only applies if you have a margin account, right?

~~~
Scoundreller
No, this is about lending stock you own to short sellers because they’re not
supposed to short naked.

~~~
koolba
No you can only lend out the securities of clients that are themselves on
margin or have an explicit borrow agreement (which grants you a kickback of
the money made from the stock loan).

Cash accounts without a margin balance cannot be lent out.

~~~
Scoundreller
Ok, but where do my holdings in a mutual fund or ETF fit?

~~~
koolba
ETFs are treated like stocks. That's kind of the point. They can be lent out
by your broker if you're on margin.

Mutual funds are opaque. It's up to the fund to decide if they want to make
some extra money lending their securities out to speculators. As they're
holding the stocks long term and standard securities lending is over
collateralized, the risk profile is relatively low compared to the extra
return.

------
neilv
For Bogle-style[1][2] total-market low-ER index investing, free trades of ETFs
is nice -- slightly more of each purchase goes towards shares, and that
compounds, over a few decades.

I happen to be married to Fidelity already. Their great support, even when
I've been poor, means that I'll show some loyalty if I'm ever rich. But it's
nice to know that Schwab, Vanguard, TD Ameritrade, etc. are also out there for
people.

[1]
[https://www.bogleheads.org/wiki/Bogleheads%C2%AE_investment_...](https://www.bogleheads.org/wiki/Bogleheads%C2%AE_investment_philosophy)

[2]
[https://www.bogleheads.org/wiki/Charles_Schwab](https://www.bogleheads.org/wiki/Charles_Schwab)

~~~
Fomite
I'll say that I've been with Schwab since I was...15 or so...and they've
always treated me like a customer who mattered.

~~~
taurath
I can call at 2am PST and get a nice british support rep in about 1.5 rings.
They’ve never given me a reason to think about leaving.

------
oplav
E*Trade and Ameritrade followed suit:

[https://techcrunch.com/2019/10/02/robinhood-e-trade-
schwab-a...](https://techcrunch.com/2019/10/02/robinhood-e-trade-schwab-
ameritrade/)

~~~
tmaly
E*Trade got a bailout from Citadel back during the mortgage crisis in exchange
for selling order flow.

~~~
mortehu
Most retail brokerages do this, and the information is regularly made public
by law.

[https://www.schwab.com/public/schwab/nn/legal_compliance/imp...](https://www.schwab.com/public/schwab/nn/legal_compliance/important_notices/order_routing.html)
shows that Schwab sends less than 1% of orders to exchanges.

~~~
perl4ever
People take offense at the idea someone is profiting off their stupidity, even
if it's objectively making them better off because they get a kickback.

------
mixmastamyk
Schwab is an ethical company, in stark contrast to most banks and other
financial institutions, that view their customers as revenue opportunities to
be harnessed for maximum profits. Happy customer for years.

~~~
anon1m0us
I was a happy customer for a long time until they broke their web interface to
the point I couldn't use it anymore. I tried everything. Finally I tracked
down the bug to a particular line of javascript, emailed customer support with
exact instructions how to fix it.

They did _nothing_. Never fixed it, so I had to move to another broker that
had working software.

~~~
slg
They also used to truncate passwords at 8 characters without making that clear
to the user. If you are someone who uses a passphrase you might have set your
password to "PasswordCorrectHorseBatteryStaple" and entered that whenever you
logged in, but anyone could access your account by just entering "Password". I
tried on multiple occasions to be escalated to or referred to someone who
would care, but no luck.

------
justinzollars
This is great news for small investors like me. I like to constantly buy, but
the etrade fees were cutting into my margins. Their numerous tax integrations
kept me attached to the platform. I won't be moving to RH

~~~
dbiue94894
For an unsophisticated rube investor (not trader) like myself, who wants to
put a little bit of every paycheck into equities, RH is a superior product.I
can wake up the morning my paycheck posts, transfer funds, and buy a couple of
shares in seconds using my phone/tablet while I am in bed. Clean, simple,
easy.

I looked into other products, but felt that none of them addressed my
particular use case. Felt like they were designed for someone very different
than myself. Anyway, if there is some good alternative I don't know about
(which is extremely likely), please suggest.

~~~
saryant
Plain old mutual funds. You can buy Vanguard funds fee-free from Vanguard in
whatever dollar amount you like. Been that way for decades.

~~~
therealrootuser
This, exactly. The only "flaw" of Vanguard's admiral funds is the $3000
minimum. For many of my friends, that is a bit of a high hill to climb to get
started. Then again, those same friends seem to think nothing about
speculating on whatever the hipster cryptocurrency is, so perhaps they have a
different set of issues they need to address.

~~~
ac29
The target date funds have a $1000 minimum and are quite reasonable options
for retirement or general diversified investments. The expense ratio is
slightly higher, but if you have less than $3000, the difference is miniscule.

Or you can buy ETF versions of Vanguard funds. Same expenses as mutual fund
versions, but the minimum purchase is 1 share. Free to trade from a Vanguard
account (or something like this Schwab account, since its exchange traded).

~~~
therealrootuser
Yep, the advent of ETFs has made it a lot easier to get started. I hadn't
thought about the target date funds, that is a good thought.

------
manigandham
TDAmeritrade and Etrade also announced $0 commissions in response.

Both brokers also had severe drops in their stock price, with TDA losing about
20% in a day. Seems the entire retail brokerage industry changed within 48
hours.

------
lentil_soup
Does anyone have any recommendations for similar brokers in Europe? All the
ones mentioned here seem to be mostly US targeted

~~~
patd
If you're looking for cheap transactions, Degiro (EU based) or
InteractiveBrokers (US based) are probably the best options.

With Degiro you can get 20€ of free commission when you sign up with a
referral

~~~
patrickmcnamara
Degiro has free commission on a bunch of popular ETFs as well.

------
jklein11
I have been a Schwab customer for over 10 years. I can’t speak highly enough
about their service. I wouldn’t think of using a different checking account. I
have only had two issues

1\. At least 5 years ago I had a 6 digit password. If I typed in my password
plus some extra digits I was able to log in. That never felt right to me.

2\. I had just gotten a new debit card and was traveling outside of the us.
When trying to activate my debit card via there international number it
wouldn’t pick up my key pad. The customer support person seemed to think it
was a known issue. I couldn’t just read the number to them for some reason. It
was very annoying.

Over all I have had an excellent experience with Schwab

~~~
jpeeler
I thought the same thing about #1 until I read this:
[https://security.stackexchange.com/questions/214814/why-
can-...](https://security.stackexchange.com/questions/214814/why-can-i-log-in-
to-my-facebook-account-with-a-misspelled-email-
password?utm_source=Iterable&utm_medium=email&utm_campaign=the-overflow-
newsletter&utm_content=10-02-19)

Perhaps/hopefully the same thing is being done with Schwab.

(As you can see from the URL, I got that link from the overflow newsletter.)

------
SnowingXIV
Another strong recommendation for Schwab. The customer service has been
stellar for years. I do hope they invest more into their UI and mobile app.
That's the only thing that's slightly lacking. It's usable though. I've tried
Simple and other "tech" banks and they've been terrible in comparison. Simple
was a disaster there was a period where people couldn't login to access their
accounts multiple times over a week because of their 2FA system having issues.

You know what the response was? Sorry you're locked out, we can't do anything
about it, wait a few days.

------
arthurcolle
Innovation! Are they selling order flow like Robinhood?

~~~
adrr
Why does it matter if a broker is selling order flow?

~~~
arthurcolle
Aren't "hackers" interested in underlying implementations?

This is Hacker News after all!

~~~
slenk
But what does selling the order flow mean?

~~~
acchow
[https://en.wikipedia.org/wiki/Payment_for_order_flow](https://en.wikipedia.org/wiki/Payment_for_order_flow)

~~~
arthurcolle
Pioneered by Bernard Madoff[1], an extremely reputable broker in his own
right. The market-making business was totally legitimate, let's not forget.

[1] convicted of running the largest Ponzi scheme on record

------
ajhurliman
I had to re-read the title a few times; the word "Commissions" is so far away
from the verb I thought they were shuttering many of their business lines at
first.

------
rdtsc
Schwab is great. Been their customer for more than a decade. I use them for
checking, retirement and regular investment. Highly recommend them.

------
yalogin
Are they competing with robinhood or are they trying to put pressure on
E*TRADE and ameritrade? Why did they do this?

~~~
kelnos
Etrade and Ameritrade did end up following suit and slashed their commissions
to zero as well.

But yes, I expect they're afraid of losing customers to RobinHood. Given that
brokerages typically make very little on commissions (the real money comes
from interest on cash deposits), dropping commission fees is probably a great
move.

------
natvert
Feeling the competition from Robinhood app?

~~~
evancox100
Commissions were only 7% of Schwab’s revenue. The real money is in 1) net
interest on money in settlement funds, and 2) payment for order flow. For
details see e.g. Matt Levine’s most recent news letter.

~~~
mikeg8
“Only” 7%... that is definitely real money and they would have probably
preferred to keep it coming in

~~~
eli
Yeah but so is their marketing budget. I’m sure this move is driving lots of
new customers in the door.

~~~
manigandham
Much more likely that it's keeping them from leaving.

~~~
sdinsn
I'm a former RH user and I switched to Schwab so I could get an IRA. I'm
guessing more people will be switching now that the fees are the same.

------
vincentmarle
Does Schwab allow you to buy fractional shares? That's the only reason why I'm
not using Robinhood.

~~~
zigzaggy
Wait, you can buy fractional shares on RH??

~~~
skinnymuch
I read it as OP is looking for that. RH lacks it.

------
User23
In a similar vein, many people don’t realize that you can actually negotiate
commissions with your broker. You can even negotiate margin interest rates.
The higher the total value of the account the better a deal you can get. Just
like cable companies, brokerages have retention incentives.

------
anon1m0us
This is actually making me consider investing again.

~~~
Scoundreller
What are you doing now?

~~~
anon1m0us
Cash and real estate. I realized after all the investing and while I did beat
the market, I realized if I invested in myself I could get 1000x returns
rather than 1.10x returns.

So I got out of the market, started a bunch of different businesses. A couple
stuck and now I'm working on another one that will need a lot of cash in the
near future, so that's where I leave it.

------
ausjke
Etrade just did the same, so called competition.

besides all competitors had a really bad day on the stock market.

------
sjg007
So do they front run then?

~~~
lbotos
They use Payment for Order Flow:
[https://en.wikipedia.org/wiki/Payment_for_order_flow](https://en.wikipedia.org/wiki/Payment_for_order_flow)

(Just like Robinhood - [https://support.robinhood.com/hc/en-
us/articles/360001400766...](https://support.robinhood.com/hc/en-
us/articles/360001400766-Stocks-Order-Routing-and-Execution-Quality))

~~~
devicetray0
Could you break this down for me? As a small-time investor, how much am I
getting screwed when I use say, Robinhood?

~~~
lbotos
Think about it this way, as a small-time investor, you won't always get the
best price. Your strategy should not be dependent on that. You should be
building positions or trading appropriately to your scale. (Read: Buy and hold
or trading at stop-loss prices, not market orders)

Said another way: The big guns will likely beat you, and you over time with
LOTS of trading may lose a few % but for most small fries it shouldn't even
matter.

That said, it looks like Robinhood is making more than most on their
orderflow:

> In September 2018, Logan Kane, a contributor to Seeking Alpha, stated that
> Robinhood's payment for order flow generated ten times the revenue as other
> brokers receive from market makers for the same volume. Bloomberg has
> analyzed Robinhood's reports to the Securities and Exchange Commission
> (SEC), and calculates that Robinhood generates almost half of its income
> from payment for order flow.

[https://www.investopedia.com/articles/active-
trading/020515/...](https://www.investopedia.com/articles/active-
trading/020515/how-robinhood-makes-money.asp)

~~~
Lazare
> Think about it this way, as a small-time investor, you won't always get the
> best price.

As a small-time investor, you can trivially get a better price than larger
investors. And you must, by law, get the National Best Bid and Offer (NBBO)
which is, at least for some purposes, the "best price".

The deck is heavily stacked against retail investors trying to actively
invest, but the issue isn't being unable to get good execution!

------
jboydyhacker
There is no such thing as a free lunch. Marketing trades either by Schwab or
others is extremely misleading since Schwab is one of the brokers that sells
your order flow.

What's better- paying $5 bucks to trade or losing a % of your total order to
someone like Citadel or routed to certain exchanges at a lesser price? If your
trade size is even remotely decent in size you will lose a lot more on
restricted order flow.

The SEC needs to require the disclosure of this practice because most people
don't realize that in exchange for "free" they are getting nuked every single
transaction all the while thinking they are skirting the system.

Like the old saying - if you look around the table and wonder who the patsy
is-- you're the patsy!

~~~
fancyfish
The rumor that the investor is getting fleeced has been debunked, and on the
contrary, the investor is potentially getting better execution and price than
otherwise. Schwab, Robinhood et al are registered brokers subject to
Regulation NMS and have a duty to seek the best execution reasonably available
for customer orders.

Your order is not changed, and no HFT is paying Schwab to be able to execute
at worse than the publicly quoted price.

Schwab is heavily regulated as a broker and required to execute your trade at
at least the National Best Bid and Offer (NBBO).

[[https://www.sec.gov/reportspubs/investor-
publications/invest...](https://www.sec.gov/reportspubs/investor-
publications/investorpubstradexechtm.html)]

~~~
jboydyhacker
Not true. Step 1- open accounts at Schwab and then IB. Put in say a complex
butterfly order at the exact same time at both brokers and see the difference
in price you get. It adds up to millions pretty quick.

------
chrisweekly
I'm a Schwab customer and concur w/ positive comments here about high-quality
retail customer service, eg for relatively "normal" investors / account
holders (ie, 6 figures AUM, not 7+).

But.

It's worth reading Michael Lewis's "Flash Boys: A Wall Street Revolt" [for
several reasons] before nurturing too many warm-n-fuzzies for Schwab or
Fidelity or any other mainstream big bank. Maybe you fellow HN readers are
more aware than I was, but I'd guess when most of you hear "high-speed
trading" you think about performance optimization and interesting technical
challenges. It's mind-boggling how blatantly and comprehensively /
systematically the financial "markets" have been captured by the interests of
a tiny few, who literally steal from pension funds. To say it's rigged is an
understatement. Must-read for anyone who thinks they know how Wall St works --
or cares to.

~~~
harryh
Read the rebuttal:

Flash Boys: Not So Fast - An Insider's Perspective on High-Frequency Trading

[https://www.amazon.com/Flash-Boys-Insiders-Perspective-
High-...](https://www.amazon.com/Flash-Boys-Insiders-Perspective-High-
Frequency-ebook/dp/B00P0QI2M2)

