Internet deals are back. So are IPOs. Just like 1999! As if to prove the point, online brokers have started new price wars.
Charles Schwab & Co. launched the first salvo in January by eliminating account fees for customers with $25,000 or more in household assets, and even losing the fees for those with $10,000 to $25,000 if they use certain credit products. Since then, Ameritrade has announced plans to launch a $5 per trade IZone, and E*Trade has declared its intention to reduce commissions for its “best customers” to as little as $6.99 per trade.
Analysts say the ferocity of this battle doesn't really make sense since some of these firms don't have offline trading.
If it's any comfort to retail brokers — who still get funny questions from clients about why they don't get $7 trades — the price wars can exact a heavy toll on the online business. The cuts set off concerns about profitability as online brokers once again battle for market share — as they did up through the market plunge of the early 1990s. The latest price war has already depressed the shares of the leading online traders, including Schwab and Ameritrade.
