Stock Trading Costs Dropping

Just when it looked like getting back into stocks was a good idea, the market has taken a header over the past few weeks. Wall Street analysts are debating whether it’s a blip or a full-fledged correction that will take some of the steam out of the almost one-year-old bull market. Whatever the outcome, however, some of those who do decide to put money into stocks will now be able to do it a lot cheaper, as two heavy hitters among the discount brokers have recently announced major cuts in trading costs.

Both Fidelity and Charles Schwab have tweaked their fee schedule to get away from a tiered pricing system, where clients are charged on a sliding scale based on the size of their portfolio and the number of trades they make. At Fidelity, clients will now pay a flat fee of $7.95 per trade, which is less than half of the maximum cost of $19.95 per trade under the old price structure. Schwab has also gotten rid of tiered pricing, charging all customers $8.95 per trade, effectively cutting the cost-per-trade for low-volume traders by more than 30%.

Fidelity also announced an agreement with Black Rock, an asset management firm, to offer commission-free trades on about 25 iShares exchange-traded funds, including the iShares S&P 500 Index Fund and the iShares MSCI Emerging Markets Index fund. The move may give Fidelity a slight edge on Schwab, say investment analysts, since Schwab offers commission-free trades only on its own ETFs.