Bank of America joins brokerage wars with unlimited free trades for preferred members

Investing

Bank of America CEO Brian Moynihan speaking on Squawk Box at the WEF in Davos Switzerland on Jan. 20th, 2019.

Adam Galica | CNBC

Another financial giant is adding to the growing consensus that the correct price of a stock trade is zero.

Bank of America said Monday that any customer of its retail banking loyalty program will now get unlimited free trades for stocks, ETFs and options. Previously, retail customers with at least $20,000 in balances got 10 or more free trades, depending on what tier a user qualified for.

The free trades, through the bank’s Merrill Edge online service, are part of a host of perks that members earn by bringing more of their dollars to the bank. The lender probably isn’t giving up much in fee revenue with the move: it estimated that 87% of trades from its loyalty group members were already free.

But Bank of America’s move solidifies the race to zero in the retail trading world. Commissions have been falling for decades as discount brokerages proliferated, a trend that accelerated as free-trading start-up Robinhood began to gain millions of users. Rival megabank J.P. Morgan Chase joined the fray last year when it introduced its own free trading service.

Then, earlier this month, Charles Schwab, which holds about $3.72 trillion in client assets, said it was taking trading commissions for stocks, ETFs and options to zero from $4.95 each. That quickly set off a cascade as TD Ameritrade and E-Trade followed suit.

Bank of America also took the cost of online trades to $2.95 from $6.95 for users of its Merrill Edge service who aren’t in its loyalty program.

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