Fidelity cuts stock trading commissions to $7.95 for all customers; gets ETF pact with iShares

Fidelity cuts trade commissions to flat $7.95 fee

BOSTON — Fidelity Investments on Tuesday undercut its brokerage rivals, reducing its online stock trading commission to a flat fee of $7.95, four weeks after Charles Schwab Corp. cut its price to $8.95.

Fidelity’s flat fee replaces a tiered structure that had charged customers as much as $19.95 per trade to as little as $8 depending on asset levels and how many online trades a customer made.

In addition to bringing Fidelity’s trading commission below Schwab’s new price, the reduction puts privately held Fidelity below its two other largest brokerage rivals. TD Ameritrade Holding Corp. charges a flat $9.99, while E-Trade Financial Corp. charges $7.99 to $12.99, depending on a customer’s assets and trading frequency.

Fidelity’s commission cut, which takes effect Wednesday, was coupled with a separate announcement that Fidelity will offer its clients commission-free online trades on 25 exchange-traded funds from iShares, which commands about half of the rapidly growing ETF market.

Fidelity, which is based in Boston, hasn’t been a player in directly offering ETFs, instead serving as a distributor offering its clients ETFs managed by other firms like iShares. ETFs are baskets of stocks that differ from mutual funds in that they can be traded like stocks during daily trading sessions, rather than being priced once a day.

ETFs have drawn attention in part because of BlackRock Inc.’s recent acquisition of iShares as part of a broader $13.5 billion deal to acquire the investment unit of the British bank Barclays.

Under the marketing agreement with BlackRock announced Tuesday, Fidelity will still charge $7.95 commissions on about 800 other ETFs from iShares and other providers that Fidelity makes available to its clients. The 25 ETFs for which online trading commissions will be waived cover a broad investment spectrum, offering clients exposure to everything from the Standard & Poor’s 500 index of stocks to the MSCI Emerging Markets index.

The commission waiver for those 25 ETFs will be in place for at least three years, and possibly longer, said James Burton, president of Fidelity’s retail brokerage business. No commission-waiver agreements are expected with other ETF providers, Burton said.

Kathleen Murphy, Fidelity’s president of personal investing, said Fidelity will likely remain a distributor of ETFs, rather than direct provider competing with such ETF providers as iShares, State Street Global Advisors and Vanguard Group.

The commission fee cut on online stock trades comes after San Francisco based Charles Schwab on Jan. 7 announced a new rate that took effect on Jan. 19, and includes $8.95 stock trades or non-Schwab ETFs. The new rate covers online stock trades regardless of investor portfolio size, frequency of trade or size of trade.

Fidelity’s reduction covers trades made online rather than orders placed by telephone. Trades made by phone will cost an additional $5, or a total $12.95 per trade, while trades made through a financial representative will cost an additional $25, or a total $32.95.

While Fidelity is primarily known for its mutual funds, the company has broadened its financial services in recent years, including its brokerage operations.