What Does Commission-Free Trading Mean For You? (with Josh)

The Compound and Friends

Josh Brown

Business News, News, Investing, Business

4.7 • 2.2K Ratings

🗓️ 2 October 2019

⏱️ 6 minutes

🔗️ Recording | iTunes | RSS

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Summary

Josh here - Charles Schwab announced that starting October 7th all commissions on stocks, ETFs and options would go down to zero. The march toward commission-free trading has been happening in slow motion for decades, ever since the 1970's. My take on it is this - it's terrific news for investors, as it lowers the cost of being an investor and gaining access to markets. But is it a "game changer"? I don't think so. It's also important to note the link between market valuations and the ease of access. On a secular basis, US stocks have been valued higher as the average fund fee, commission fee and other costs have fallen. Trading volumes have soared and more participants than ever are using the public markets to build wealth. This is not a coincidence. 1-click play or subscribe on your favorite podcast app Subscribe to the mini podcast on iTunes or Spotify Enable our Alexa skill here - "Alexa, play the Compound show!" Talk to us about your portfolio or financial plan here: http://ritholtzwealth.com/ Obviously nothing on this channel should be considered as personalized financial advice just for you or a solicitation to buy or sell any securities. Please see this 3,000 word terms & conditions disclaimer: https://thereformedbroker.com/terms-and-conditions/ Hosted on Acast. See acast.com/privacy for more information. Learn more about your ad choices. Visit megaphone.fm/adchoices

Transcript

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0:00.0	Real quick, I couldn't resist. I wanted to weigh in on this thing that Schwab announced today.
0:04.7	Starting October 7th, they are going to be making all stock, E.T.F, and option trades,
0:11.6	zero dollar commission. so free trading on stocks
0:15.0	ETFs and options the stock market has had a violent reaction to this news
0:20.4	Schwab is down about 9%. They're giving up roughly I think 90 to 100
0:26.0	million in annual revenue or 3 to 4%. I think that's the number.
0:30.1	TD Ameritrade is down double, down 21% on the news.
0:34.5	I didn't check E-Trade, I'm sure it's a shit show.
0:37.0	I just want to make a couple of points here that I think might get lost in the shuffle
0:41.2	from an investor's perspective.
0:43.2	First of all, this is phenomenal news.
0:46.4	Commission rates for trading have been falling for decades precipitously
0:51.7	up until the 1970s so for 180 years the New York Stock Exchange
0:57.1	had something called fixed commissions which meant there was a minimum
1:01.0	commission that every brokerage house had to charge for every
1:04.6	trade.
1:05.6	And then in 1970, the chairman saw that he was losing business to other exchanges, capitulated
1:11.8	and said, all right, I changed my mind we might have to revisit this this
1:16.8	concept of a minimum commission and a fixed commission and on 19 May 1st 1975 what's still known as May Day they announced that
1:27.9	negotiated commissions and volume discounts would now be allowed and
1:32.4	right around that time there was a guy volume discounts would now be allowed.
1:32.7	And right around that time there was a guy
	...

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