Bank of America offers free online stock trades. Nice for those in the US! How about they follow suit here?
http://www.chicagotribune.com/technology/chi-061011bankofamerica-story,0,6157300.story?coll=chi-business-hed Bank of America offers free online stock trades
By Will Edwards Bloomerg News Published October 11, 2006, 5:05 PM CDT
Bank of America Corp., seeking to attract new clients, offered free online stock trades to customers with accounts of at least $25,000, sending shares of discount brokers lower.
The second-largest U.S. bank said customers in New York, Boston and other cities in the northeast U.S. will get 30 free trades a month so long as they maintain the minimum balance in any combination of accounts. Such trades usually cost $5 to $10, meaning customers may save as much as $3,600 a year. Bank of America said the program, which is effective immediately, will be extended nationwide over the next few months.
Online brokers ``will probably have to follow suit'' with price cuts, said Thomas Kaylor, an analyst at CRT Capital Group in Stamford, Connecticut, who rates E{mldr}Trade ``buy.'' ``By giving away free trades, it reduces some of the incentive customers have for moving assets over to online brokers.''
Bank of America's move ratchets up competitive pressures that already forced Charles Schwab Corp., TD Ameritrade Holding Corp. and E{mldr}Trade Financial Corp. to slash commissions. The Charlotte, North Carolina-based bank expects to recover the cost of free trades by luring customers into fee-paying products such as mortgages and checking accounts, services that not all discount brokers can match.
The prospect of customer losses and lower profits sent shares of San Francisco-based Schwab, the biggest discount broker, down 4.7 percent. TD Ameritrade, which ranks third and is based in Omaha, Nebraska, dropped 12 percent. New York's E{mldr}Trade, the No. 4 online broker, fell 8.8 percent. The three stocks helped push the 12-member Amex Securities Broker/Dealer Index down 3.9 percent, the benchmark's biggest one-day loss since June 13.
Charlotte, North Carolina-based Bank of America fell 59 cents, or 1.1 percent, to $54.04 in composite trading on the New York Stock Exchange.
E{mldr}Trade, TD Ameritrade and Schwab said they don't currently plan to cut commissions, and E{mldr}Trade's chief operating officer, Jarrett Lilien, said in an interview he doesn't expect to lose customers.
``It's a non-event, and all of this hoopla will disappear shortly,'' Lilien said. ``People distrust things that are free, and when they do the math, they'll realize that when you pay nothing, you get nothing.''
E{mldr}Trade charges $9.99 per trade for ``active'' traders and investors -- customers who execute at least 30 transactions a quarter or have $50,000 in their accounts, spokeswoman Pam Erickson said. ``Main Street investors,'' or those that don't meet the minimums, pay $12.99, she said.
A special advertised on E{mldr}Trade's Web site offers customers who open an active-trade account 100 free trades for the first 30 days. To qualify, they have to make a $1,000 minimum deposit.
A statement from Charles Schwab, chairman and chief executive of the self-named discount brokerage, said clients look at ``the whole picture -- rates on their cash, trading costs, quality of services and investment advice.'' TD Ameritrade spokeswoman Katrina Becker echoed his comments and said free trades have been tried before.
``There are zero-commission offerings now, and to date they haven't been successful in getting significant market share,'' Becker said.
For Schwab, the increased competition comes from its former parent company. Management at San Francisco-based Schwab led a $280 million buyout in 1987 from BankAmerica Corp., the company that combined with Charlotte's NationsBank Corp. in 1998 to form modern-day Bank of America.
Bank of America's offer would apply to about 40 percent of the 54 million households that have an account with the bank, Liam McGee, president of Bank of America's global consumer and small-business banking unit, told reporters on a conference call. He said the offer would add to earnings from ``day one.''
``Unlike most other financial-service companies, we do not measure profitability on a single-product basis,'' McGee said. ``We're interested in building quality relationships with our customers and measuring profitability on an aggregate basis.''
Bank of America cut stock-trading commissions to $14 from $19.95 in December for customers who didn't have accounts with the bank. For those who did have personal checking accounts, the discounts were steeper.
Online brokers could lose even more business if other large banks decide to offer free trades, Kaylor said.
San Francisco's Wells Fargo & Co., the fifth-biggest U.S. bank, began offering 50 free stock and mutual fund trades in June 2005 for customers with more than $250,000 in assets at the company. Trades after that cost $9.95, a cut from $19.95 for stocks and $35 for mutual funds with transaction fees.
Last week, Los Angeles-based Zecco.com, an online trading site, said it would begin offering 40 zero-commission trades a month for clients who maintained a $2,500 balance.
