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E*Trade Announces $0 Base Commissions for Online Stock, ETF, and Options Trades (etrade.com)
118 points by troydavis 18 days ago | hide | past | web | favorite | 67 comments



Maybe all of you read every word Matt Levine writes as I do, but in case you don't, here is his explanation:

https://www.bloomberg.com/opinion/articles/2019-10-02/the-tr...



It's great written and very relevant. I did find the second half where he discusses wework and how to short unicorns more interesting (answer you start your own if you think money is too loose).


His style is unique, particularly for a mainstream title like Bloomberg. I’d love to read a dissection of it.


I love reading his stuff. I would honestly pay up to one of two dozen dollars a month for his very high quality thinking.


I hope this is the future of journalism. Following individual journalists rather than just a topic like business. While the big breaking headlines and opinion pieces get mixed in between.

If I ran WSJ or the like I'd make following the journos a core feature of the product. Some offer it but it's usually tacked on as an after thought.


Are you saying that as a Bloomberg subscriber?


I think his interests are not exactly in alignment with Bloomberg...that's why you can subscribe to his column for free, without paying for the rest of Bloomberg. I have a feeling it won't last forever.


I suppose. I see his articles as paywalled but I take it there is another way to them. I could certainly see him successfully moving to something like Substack.


There's no paywall if you sign up for his newsletter: http://link.mail.bloombergbusiness.com/join/4wm/moneystuff-s...


Totally agreed, and I'm not even much of an investor.


Right along with charles schwab [0]. Amazing what a little competition from Robinhood can do.

[0]: https://www.cnbc.com/2019/10/01/charles-schwab-is-eliminatin...


Id venture robinhood is getting a little too much credit here.

The order this happened in was Interactive Brokers, Schwab, TD Ameritrade, Etrade. They were obviously all prepared to do it in the event one of them went for it. Interactive Brokers did this more to give themselves a competitive edge over Schwab, TDA, and ETrade. That lasted about a day.


I don't think so. None of these brokers would have gone down this path without the pressure that zero fee brokers have been bringing. It was easy to call that ETrade was cornered to follow after Schwab announced last week [0]. And like I mentioned in another comment: just because Schwab and ETrade have better tooling and many more features that doesn't always matter for some. I still use tools outside of ETrade and for certain trades will continue to run them through Robinhood. Now there's less incentive though, which is great for me as the consumer.

[0] https://news.ycombinator.com/item?id=21142786


It was a race to the bottom, it may have taken longer, but they all would have been shaving a dollar off at a time till somebody hit zero.


Kinda sucks that IB started a whole new (gimped) service for this. I want my TWS and API access, why can't they let me choose whether I want to pay commissions or let them sell my order flow and do the trades for free?


if it makes you feel better, their API is text based and doesnt use message delimiters, so update TWS with great care, because a single new character off in any message will break your entire stream of data, order execution(and especially combo) entries, etc..

They also have some of the worst real time market data available (intraday), absolutely horrendous historical market data request rate limiting and more. Great brokerage, but if you're interested in API for more than orders I recommend other services for realtime data


Who do you recommend for an API for more than orders? Just yesterday I was looking at IBs data streams to figure out if they give me what I need without hitting rate limits.


depends - if you're doing aggressive intraday trading based on realtime data (tick or so), i can recommend many depending on need and cost, email me for details. As someone who used to trade for a living with a technical bent, Im passionate about it

if you just need reliable daily without 1440 minute bars going wack IB is probably ok


The first to offer (limited) free trades was Zecco, which later became TradeKing.

I think RobinHood was the first to sell the rights to trade against their users, though.


Discussed a couple day ago: https://news.ycombinator.com/item?id=21136348


It was Interactive Brokers that forced Schwab's hand.


And TDAmeritrade.


Anybody have a Charles Schwab account in the UK? I've been looking for a low fee brokerage who offer a business account in the UK. So far only IB seems to tick the box.


E*Trade, Schwab, and pretty much every other brokerage is playing catchup with RobinHood, which has had free trades on stocks and options from the very beginning. This has caused a steady exodus of users on these commission charging platforms, crossing over to RH. It's especially pronounced with Millenials and Gen-Z / "Post millenials".

You may not always get the best pricing, and also there are no market trades as of this writing on RobinHood, but the RH UI handily beats everyone else in terms of ease of use and simplicity.

The options trading functionality, for instance is very simple. You select options and then it presents you with a list of (screen) options on whether you think stock will go up, down, or sideways. Based on that, they show you low risk, high risk call options, put options or stangles and straddles. You can place a trade with a couple of taps. If you want to get more specific and sophisticated, you can choose the expiry dates and select your own call / put options.

Compare this to TD Ameritrades UI and Schwab's UI, it looks like some guys from the 90s, stuck in the 90s, are still working on the UI team.

Truly clunky, horrible, confusing and annoying.


I don’t disagree that Robinhood has a better UI for casual users, but the rest of their UX is awful.

Trades take considerably longer to execute than on other platforms. They tend to hide things that are “advanced”, even when it’s important for a trader to learn to use them (for example, the default Buy type is a Market Order instead of a Limit).

Most brokers have protections in place so you don’t shoot yourself in the foot. For example, say you placed a sell order on Robinhood, but want to cancel it. You have to go through 3-4 clicks to get to the order record and cancel it. Oh, and that horrible UX is a chatbot.

Robinhood strikes me as an app that was designed by folks that have limited trading experience. On the mobile app, you can’t select to view your positions by Total Return and simultaneously view your watchlist by Last Price; you must select one or the other. The watchlist of stocks is of course not going to have a total return, so the app just displays “N/A”.

What Robinhood has actually managed to capture is the “bro trader” mentality of the Trump era bull market, and for that they deserve some credit. Check out /r/wallstreetbets for examples. I think a lot of people associate millennials with being broke and having no concept of financial security, however Robinhood is making a name for themselves as the broker of millennials. It’s just a shame RH is so terrible.


I agree RH isn’t a power tool like other but I know several people who got their feet wet with it and are now considering moving.

Shameless plug for my employer TradeStation. We just launched zero commission Friday[0]. I’d be interested to hear a critique of our web/mobile ui. It’s more trader oriented but I’m not an expert

[0] https://www.tradestation.com/promo/tsgo/


I think this logic is hilarious.

You really believe that the “millennials and zoomers” actually have enough capital to compete with these traditional brokerages?

Robinhood doesn’t event pay out dividends.

You’re overselling it. Their education for options is basic at best. PLUS anyone who is serious about playing options should actually invest time in learning it.

If anything, its cleaner ui makes it easier for said demographic to LOSE money.

You may think RH is large, but I’m guessing your vantage point is from within the tech bubble.


> Robinhood doesn’t event pay out dividends.

Hmm? Of course they pay out dividends. I don't even see how it would be legal for a broker to keep a customers dividends.

https://support.robinhood.com/hc/en-us/articles/360001227206...


Yes, can confirm that they pay dividends. I use Robin Hood and get dividends on several stocks. I’d imagine it would be illegal to withhold dividends.


Huh? I get my dividends hitting my account when stuff I hold in RH pays out.


In addition to learning the theory, anyone that wants to trade options beyond the just messing around level should really learn and use whatever their broker's desktop trading platform is. All the ones I've looked at provide far more information (the greeks, IV, and lots of other stuff) than the same brokers' web interfaces. Also as a bonus the data update is much closer to real time and not every minute or so.


Maybe next the brokers will stop asking almost 6% above Libor for a loan that’s better secured than most mortgages. I get offers in the mail for unsecured personal loans that are better rates than margin from any broker besides Interactive Brokers. Warning about them though: I hear they are extremely aggressive on margin calls and skip right to liquidation so be smart.


That's only for the "smucks", though. If you have a proper banking relationship, you'll get great rates.


I learned this lesson recently. I had to go into a bank to get a prime + 0.5 line of credit secured against my home's equity. Nowhere on the internet would an online formula give me anything close.


Proper banking relationship in what sense? Credit union?


Interactive's margin rates are benchmark + 1% for 100k, bm + 5% for 1m. So right now, 2.33% at $1m which compares really favorable to a mortgages. They also let you set liquidation preferences on your assets.

https://www.interactivebrokers.com/en/index.php?f=44427


Required reading about discount brokerage revenue streams from patio11: https://www.kalzumeus.com/2019/6/26/how-brokerages-make-mone....


I found Levine's article which was posted by someone else shorter and clearer.

Had to give up 1/4th of the article in for this one, it just goes on and on for something that can be summarized in two paragraphs.


Does this apply to RSU accounts opened by companies for their offshore employees too?

The brokerage some of my colleagues pay to E*Trade is huge. $15 per trade to sell RSUs. And sometimes it gets too costly for them to sell RSU because of the brokerage costs.


Thinking of moving from Fidelity to Etrade/TD Ameritrade but hanging around a bit and seeing if (when) Fidelity would follow suit with implementing 0 commission trades.


What’s wrong with fidelity or why are you thinking of moving?


Fidelity already offers no-commission trades on most of the iShares ETFs.


I really like Etrade's research tools and trading tools. Power Etrade is very useful for deciphering short/medium term trades.


Does anyone (outside Robinhood) do 0 commission options trades?


Firstrade has been doing so since the middle of last year. Although if you choose to actually EXERCISE an option, rather trading it prior to expiration, then there are fees involved in that.

ETrade's annoucement says that they are eliminating commissions for stock AND option trades. But the fine print says that they're still charging $0.65/contract. Apparently, it doesn't count if they use the phrase "contract charge" instead of "commission". https://about.etrade.com/newsroom/press-releases/article?qmo...



Read their fine print. There's still a "contract charge" of $0.65/contract. Apparently many of these players are eliminating commissions by using a different word for it instead.

As far as I know of, only Robinhood and Firstrade have true zero-cost option trading. And even then, there can be fees involved if you actually exercise options.


There are a bunch of places that do 0 commission but they usually charge a separate fee for the contract (which seems to universally be treated as separate from commission).

Aside from the options others have mentioned, there are a bunch of brokerages that charge a monthly fee and give you unlimited trades. These are targeted at very active traders.


This is great news indeed. However their mobile UI is really horrible and hope they fix it


Their desktop one isn’t too great either, it took me awhile to figure out how to do basic stuff - they have way too much stuff going on and it doesn’t seem very well logically separated to me.


So how do they make their money? Front-running? Payments for order flow?



I found the writing pretty hard to follow and overly complicated.


Read Levine's explanation linked earlier in the thread.


Anyone want to share the gist of that article?


Discount brokerages mostly make money on interest.


Interest on what though? Isn’t most money immediately invested or put in money market funds?


A lot of people leave some money in the sweep account, so it's liquid for future trades. Or leave it for a few days after a sale before transferring it out.


They offer their own money market funds that are below 'market' rate and collect the difference.


Well shit.


FX.


We've been doing $0 broking in India for a while now. Nithin (founder) recently shared his perspective[1] on this, albeit largely in the Indian context.

TLDR: While going $0 was long time coming, US brokers have other avenues of earning, unlike their Indian counterparts.

[1] https://zerodha.com/z-connect/rainmatter/the-race-to-zero-ca...


If you’re not paying for it, you’re the product. In this case they’re selling your order flow.


People pay for order flow because retail customers are, on average, idiots. If you didn't get paid, you'd still be just as smart or dumb as you ever were, you just wouldn't be getting a rebate.


That only really matters if you only place market orders. And even then the routing may result in a better execution price than going straight to the exchange.


My understanding is it would be illegal if it didn't result in a better price.




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