BofA Free Online Trade Announcement Crushes Online Brokerage Stocks

by: Mick Weinstein

Excerpt from our Wall Street Breakfast, a one-page summary of this morning's key market-moving and stock-moving stories:

Will BofA Put Rivals Out of Commissions? [Business Week]

Summary: Banc of America announced that it will offer up to 30 free online equity trades per month for investors with a combined balance of $25,000 or more with the bank. BofA will immediately begin to promote the new program in Northeastern cities such as New York, Philadelphia, and Boston, and extend the promotions across the country by February. BofA says millions of customers quality for free trades, and that the target market covers 52 million households; Bank of America Investment Services currently has only 430,000 online brokerage accounts. Online brokerage stocks were hit hard by the announcement: E*Trade Financial Corp. fell 8.8%, Charles Schwab Corp. 4.7%, and TD Ameritrade Holdings 11.9%. But executives of those companies said that most customers look at the total package, including execution quality, rates paid on deposits, investment advice and research. Analysts said the sell-off in online brokerage stocks was an overreaction.
Related links: The online brokerages have diversified away from over-reliance on commissions over the last few years. Exact exposure to brokerage commissions is discussed in their conference calls; see most recent transcripts from TD Ameritrade and E*Trade. • Previous cheap or zero cost trading offers: Zecco To Offer Free Stock TradingWells Fargo Aims at Schwab, TD Waterhouse, Ameritrade, E*TradeOnline Brokerage Acquisitions Make Room For TradeKing?
Potentially impacted stocks and ETFs: Online brokerages: TD Ameritrade (NASDAQ:AMTD), E*Trade (NYSE:ET), Schwab (SCH), OptionsExpress (NASDAQ:OXPS). • Banks: Bank of America (NYSE:BAC), Wells Fargo (NYSE:WFC). • ETFs: Regional Bank HOLDRs ETF (NYSEARCA:RKH), streetTRACKS KBW Regional Banking ETF (NYSEARCA:KRE).

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