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Fidelity slashes trading costs

City A.M. Reporter
Fidelity Investments yesterday said it plans sharp price reductions for US online equity trading, the latest move in a price war among retail brokerages that drove down shares of several other firms.

Fidelity, the Boston-based mutual fund powerhouse, also said it plans to waive trading fees for 25 exchange-traded funds offered by BlackRock’s iShares unit -- a striking partnership as Fidelity to date has largely avoided the fast-growing ETF space.

Both steps reflect the efforts of online brokerages to capture market share as retail investors rebalance their portfolios amid uncertain markets. Broadly, the industry seems to be shifting to an equal-fee model that could benefit smaller investors, who in the past have paid more than traders with more assets or higher trading volumes.

As of 3 February Fidelity, one of the largest online brokerages, will charge $7.95 per trade for US equities, down from a previous tiered fee structure of $8 to $19.95 per trade. The new flat rate is $1 per trade lower than the reduced rate announced last month by the biggest online broker, Charles Schwab.

Analysts had expected rivals to match Schwab, whose move had been seen as a grab for greater market share in the online brokerage industry as it slowed late last year. While trading volumes jumped in January, low interest rates have continued to hurt brokers’ interest-based revenue. Another big player, TD Ameritrade, has charged a flat $9.99 per trade rate since 2006.