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Keeping Up with the Joneses

By golly, I think we've got us a price war. Early last month, Charles Schwab cut its online commissions for trading in US stock and exchange-traded funds (ETFs)1 to $6.95 from $8.95 a trade. Not to be outdone, Fidelity cut its commissions to $4.95 from $7.95 this past Monday. And a day later, Schwab matched Fidelity's $4.95.

Notably absent from this tit for tat price cutting was our independent custodian, TD Ameritrade Institutional (TDAI). That was until last night, when TDAI announced it was cutting commissions on these types of trades to $6.95, a 30 percent reduction from its $9.95 level. The cut will take effect on March 6.

Although TDAI's stated commissions remain $2 above those of Schwab and Fidelity, TDAI still remains the clear value leader in our eyes — just as it was in January when TDAI commissions were $2-3 above those of these competitors. The reason being that TDAI's list of commission-free ETFs is much superior to those of Schwab and Fidelity. We find Vanguard ETFs to offer the lowest prices and/or the highest liquidity in most categories, and TDAI is the only custodian of these three that includes Vanguard ETFs in its list of commission-free ETFs.

Read TD Ameritrade's commission reduction press release here.


1Mutual funds, exchange-traded funds and exchange-traded notes are sold by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained directly from the Fund Company or your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.