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T. Rowe (TROW) to Remove Brokerage Commission on Online Trades

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Per an article by Financial Times, T. Rowe Price Group (TROW - Free Report) is planning to forgo commissions on the online purchases of third-party ETFs and stocks in its brokerage accounts, effective Mar 1.

Customers holding brokerage accounts with the company are currently being charged $19.95 per trade of a stock or ETF executed online. Those in the Select Client Services program, with $250,000 or more in assets, are being charged $9.95 per trade.

T. Rowe at present is not charging commissions on transactions relating to proprietary ETFs and mutual funds. It also offers commission-free trading for ETFs on the FundVest no-transaction-fee platform maintained by Pershing, which provides custody for T Rowe’s brokerage accounts.

The trend of zero commissions started in 2019. Charles Schwab (SCHW - Free Report) and Fidelity Investments took brokerage price wars a notch up by announcing plans to double the number of ETFs that can be traded without paying commission on their platforms. Later in 2019, Bank of America (BAC - Free Report) widened its zero-dollar online trading offering for its Preferred Rewards program and cut commissions for others. Also, Interactive Brokers (IBKR - Free Report) closely followed the lead.

Increasing competition from FinTech startups like Robinhood Markets Inc., M1 Finance, WeBull and TradeZero, which already offered zero-cost stock trading services, was weakening online brokerage firms’ foothold. Thus, in order to garner market share, online brokerage firms introduced commission-free trading.

Nevertheless, since the introduction of commission-free trading, almost all online brokers have been able to attract new clients. This helped them generate fees from providing other services. Additionally, in 2020, during the lockdown, many new retail investors entered the markets as staying at home and government stimulus packages gave them surplus time as well as cash to begin with amateur stock market trading. This further supported firms’ trading revenues.

Shares of the company have gained 18.3% in the past six months compared with 26.7% growth witnessed by the industry.

Currently, T. Rowe carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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