January 2014: Commissions Review

In this month’s Broker Monitor Report, we review the commission schedules of all firms in the coverage group. As in previous commission reviews, we convey our findings primarily through two matrices. First, we offer the Self-Directed Commission Matrix, which provides a comprehensive view of discount broker pricing for stock, option, mutual fund and fixed income trades. We also differentiate between trading channels – online, phone and broker-assisted – within this matrix. The second matrix covers the commissions charged by full-service brokerage firms. While self-directed firms’ commissions are typically available, and even highly-promoted online, full-service firms’ commissions are generally more difficult to uncover for various reasons. In our review, we examined commissions for stock and options trades, along with no-load mutual fund orders for all standard self-directed accounts. We also looked at fixed income commissions and outlined rates for individual bond and CD products. All commissions reflect standard market orders.

Over the course of 2013, there were few changes to the standard commission rates charged by discount brokers. Only three firms made any impactful changes. All other brokerages in our coverage group did not change their commission schedules.
Online commissions continued to drop slightly (by about 4% from last year). The current industry average for online stock and ETF commissions (based on the firms in our coverage group) is $8.13 per trade; online options is about the same at $8.71 (base) plus an average of $0.97 per contract. Online no-load transaction fee mutual fund trades remain pricey at $31.72 per trade, though it was a 5% drop from last year. 
Additional key findings include:

  • Online commissions for penny stocks are the same as standard stocks at all discount firms except three.
  • Four firms impose a share limit for online equity trades.
  • 33% of discount firms employ the standard online options trade commission for options exercises and assignments; all other firms charge a separate rate.
  • Currently three firms maintain a tiered commission schedule based on trade frequency or account asset level.
  • Only two firms in our coverage group have free trade offers built in to their commission schedule.