(Bloomberg) -- Investors can “breathe a sigh of relief” as Fidelity Investments matched rivals instead of escalating a recent price war, according to Morgan Stanley.
Shares of TD Ameritrade Holding Corp. jumped 2.9% in pre-market trading, while Charles Schwab Corp. rose 1.8% and E*Trade Financial Corp. gained 2.3%. TD Ameritrade has plunged 31% in the past month, while Schwab and E*Trade have both tumbled 15%, as brokers gave up on commissions.
“Product pricing is now in-line across e-brokers and Fidelity and removes a near-term overhang,” Morgan Stanley analyst Michael Cyprys wrote in a note. He flagged Fidelity leaving its contract fee on options at 65c per contract, and said, “fears around margin lending going to zero are well overdone.”
Cyprys added that Fidelity highlighting its money fund sweep option, which pays a higher yield on customer cash balances than bank sweep offerings at Schwab, TD Ameritrade and E*Trade isn’t new. “They’ve been touting this for a while now, and concerns around this are already reflected in the price for Schwab,” he said.
Read more: Schwab, E*Trade Fall as Fidelity Directs Cash to High Yields
Fidelity said Thursday it will offer zero commissions for online buying and selling of U.S. stocks, exchange-traded funds and options, and also provide higher yields for cash balances and better trade execution. The move came after four major industry players rolled out commission-free stock and ETF trading:
- Interactive Brokers Group Inc. announced commission-free stock and ETF trading in late September
- Schwab and TD Ameritrade then slashed trading fees to zero on Oct. 1
- E*Trade joined its rivals and cut commissions to zero the next day
Read more: Schwab Triggers Online-Broker Bloodbath as Price War Deepen
Last week, Cyprys had said that he saw a higher probability Fidelity would reduce prices after E*Trade, TD Ameritrade and Schwab slashed commissions to zero.
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