NEW YORK, Feb 7 (Reuters) - Discount brokerage E*Trade does not plan to follow its competitor Charles Schwab’s price cuts, the online trading platform’s chief financial officer said on Tuesday at Credit Suisse’s Financial Services Forum.
Schwab announced last Thursday that it would reduce its online equity and ETF trade commissions to $6.95 from $8.95. Shares in Schwab, TD Ameritrade and E*Trade sank on the news as investors bet it was the start of a new price war.
E*Trade shares closed down 8.9 percent on Thursday. E*Trade CFO Michael Pizzi’s comments reassured investors somewhat, but the stock was still trading 5.6 percent lower on Tuesday from where it closed the day before Schwab’s announcement.
Pizzi said he did not want to downplay his competitor’s price cuts because Schwab is the country’s biggest online brokerage. “But we’re not going to make a knee-jerk reaction and move” our commissions, he said.
Derivatives traders are one of E*Trade’s core groups of clients, and the firm’s surveys find they like the firm’s platform, service and trade execution, Pizzi said.
“I really don’t see today’s active derivative trader moving to a platform that’s less good to save a couple bucks,” Pizzi said.
TD Ameritrade Chief Executive Tim Hockey told CNBC last week that he would evaluate what his company could do in response to the Schwab move, but has not announced specific plans.
Morningstar analyst Michael Wong wrote that the competitive implications of Schwab’s price move hit TD Ameritrade the hardest because 40 percent of the firm’s revenue comes from trading.
“Peers must now decide whether they want to match Schwab’s price cut,” Wong wrote. For TD, “It’s a much weightier decision to make.” (Reporting by Elizabeth Dilts; Additional reporting by Sinead Carew; Editing by Dan Grebler)