ETF price wars: Schwab cuts fees on two EM funds

The Schwab (SCHW) Emerging Markets Equity ETF (SCHE) expense ratio is lowered to 14 basis points from 15. This compares to 15 bps at Vanguard's FTSE Emerging Markets ETF (VWO). The expense ratio for the Schwab International Small Cap Equity ETF (SCHC) is cut to 19 bps from 20.

"We're not going to stop there," said Schwab CEO Walt Bettinger last September, when his company cut fees on a number of ETFs (including the 2 above).

Who knows where it stops, but analysts expect (and Schwab management hasn't disagreed) this is about attracting more clients and wealth managers to the overall company platform in the hopes they make use of other more expensive services.

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Comments (5)
  • bryan.g.forsyth
    , contributor
    Comments (797) | Send Message
    wonder how much security lending they are doing...
    17 Mar 2014, 09:46 AM Reply Like
  • Iqbal_
    , contributor
    Comments (36) | Send Message
    They may be cutting expense ratio. but I think they have other ways to make up for any loss of profit. In my dealing, they don't fill orders fairly.
    17 Mar 2014, 02:48 PM Reply Like
  • milt8
    , contributor
    Comments (2) | Send Message
    I have been a schwab customer for 30 years and have never had a complaint about their order-filling, unlike my experiences at e-trade and fidelity.
    20 Mar 2014, 07:26 PM Reply Like
  • Iqbal_
    , contributor
    Comments (36) | Send Message
    Have you monitor Schwab order filling on level II quotation? Here is an experiment you can do to check their order filling process. Say you want to sell 1000 shares of ABC, instead of selling a round lot of 1000 shares, put a limit order of 1001 or 1003 shares at bid while monitoring level II screen. This way on level II screen you can see which market maker gets your order from Schwab. If same market makers processes your every trade, this in my opinion shows that Schwab may be getting kick backs from market maker for routing order to them. I have seen all my trades are routed to USBB.
    21 Mar 2014, 07:45 AM Reply Like
  • ronniebear
    , contributor
    Comments (2) | Send Message
    Brokerages who offer commission-free ETFs may get some extra $$ from the market maker - whether it be the Schwab-brand ETFs, the third-party One Source ETFs from Powershares et al., or similar programs offered by Fidelity and TD Ameritrade. In fairness, many of these ETFs are being purchased by small investors in tiny portions (i.e. 10 or 15 shares per transaction), by small investors use use commission-free ETFs (rather than mutual funds) as a vehicle for dollar-cost averaging as part of a buy-and-accumulate strategy. There isn't a lot of profit to be gained from small transactions.
    29 Nov 2014, 02:20 AM Reply Like
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