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Blog Coverage E*Trade is the Latest Entrant in the Online Broker Price War; Announced Reduction in Base Rate and Active Trader Commission

Upcoming AWS Coverage on Leucadia National Post-Earnings Results

LONDON, UK / ACCESSWIRE / March 3, 2017 / Active Wall St. blog coverage looks at the headline from online brokerage and financial services firm, ETRADE Financial Corp. (NASDAQ: ETFC) as the Company announced on March 02, 2017, that it is reducing its trade commissions and launched a new active trading program with a new pricing tier for its customers. Register with us now for your free membership and blog access at:

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One of ETRADE Financial's competitors within the Investment Brokerage - National space, Leucadia National Corp. (NYSE: LUK), reported on February 27, 2017, its financial results for the three and twelve month periods ended December 31, 2016. AWS will be initiating a research report on Leucadia National in the coming days.

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About E*Trade's new trading commissions and new active trading program

The new base rate for trades for all its customers will be $6.95 per trade, which is lower than the current base rates of $9.99 per trade. The Company has introduced a new active trading program tier with a new pricing strategy wherein its customers could execute 30 plus trades in a given quarter. The new trading tier replaces the earlier active trading tier of 150+ trades per quarter. The commissions for the new active trading program will be $4.95 per trade and the commission for options will be $0.50 per options contract which has been reduced from the earlier rate of $0.75 per options contract. The new base rates and active trader commissions will be effective from March 13, 2017.

Commenting on the introduction of the new rates, Karl Roessner CEO of E*Trade said: "While we know that an exceptional customer experience is far more important to traders and investors than price, with our new commission structure we are able to reward our most active equity and derivative traders and investors, while at the same time providing exceptional value to all who call E*TRADE home."

Timing of E*Trade's decision and current Broker Price War

An all-out pricing war seems to have swept the online brokerage businesses in the last few days. The war was triggered by the Charles Schwab Corp. when it announced the reduction of commission in early February 2017, where its standard online equity and ETF (exchange traded funds) trade commission was slashed from $8.95 to $6.952 per trade. Later on, Fidelity Investments announced on February 28, 2017, that it was lowering its online brokerage and trade commissions from $7.95 to $4.95 per trade for trading on its platform in US based stocks and exchange-traded funds. Fidelity's idea was to attract maximum number of customers by offering the cheapest services compared to is competitors. Within a few hours of Fidelity's announcement, Charles Schwab Corp.'s reduced its fees to match that of Fidelity. Earlier on February 24, 2017, The Vanguard Group cut fees on 68 mutual fund and ETF shares. On March 01, 2017, TD Ameritrade Holding Corporation cut its online equity and ETF trade commissions from $9.99 to $6.95. E*Trade's is the latest player to join the bandwagon with its announcement to reduce its commissions.

The reason for the online trading Companies to lower commissions is understandable as investors have been investing in mutual funds and ETFs that charge lower fees. According to a report by ETFGI, an independent research and consultancy firm specializing in global ETF/ETP (Exchange traded fund /Exchange-traded products) ecosystem, assets invested in ETFs/ETPs listed in the US reached $2.641 trillion at the end January 2017. ETFGI's also reported that as on end of January 2017, there were 1,984 ETFs/ETPs in US, with assets of over $2.641 trillion, from 107 providers listed on 3 exchanges.

Lowering of fees as a strategy may work in the short-run but the question is whether this is sustainable in the long-run. New entrant in this sector - Robinhood Financial, LLC seems to think that paying for online trades should be a thing of the past. Robinhood's mission is to democratize access to the financial markets and they charge $0 commissions on the trades made on its platform.

Although the lowering of commissions is lucrative to customers of the online trading Companies, the resulting lower earnings, lower profits, and a lower return for its investors is a cause for concern. Growing customer awareness also means that apart from low cost of trade they are also looking at aspects like brokerage firm's trading platform, trade execution, stock research, and investor education offerings, etc.

Stock Performance

At the close of trading session on Thursday, March 02, 2017, ETRADE Financial's share price finished the trading session at $35.03, slipping 3.23%. A total volume of 5.28 million shares exchanged hands, which was higher than the 3 months average volume of 3.37 million shares. The stock has soared 32.49% and 40.18% in the last six months and past twelve months, respectively. Furthermore, since the start of the year, shares of the Company have gained 1.10%. The stock is trading at a PE ratio of 17.72 and currently has a market cap of $9.66 billion.

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