Free trades with Bank of America

[stck8ter]

Hey, just heard now that b of a will offer free trades to customers with min balances of $25,000. Looks like they are going after the day traders, and depositers.

Will look into it to see what kind of platform they offer. Dang, just as scottrade offers online transfers, now I can just go to the local b of a and deposit....

[metalheadrr3]

Yea I saw that on CNBC. If anyone has checked this out please post about it.

[unstatusthequo]

If BoA was PAYING me to trade, I wouldn't do it. Why?

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2006/08/30/BUGTGKRHSF1.DTL

Bastards.

[TonyM]

If their trading service is anything like the rest of their service, to say it would suck would be an understatement. I have multiple accounts with them and the (lack of) customer service and 'hidden' fees make me regret ever switching from Wachovia. I'll be switching again when the timing is right.

[Blackark]

Right now this offer is only valid for customers in the Northeastern part of the U.S. With rollouts to other "select" markets by Feb. 2007. This from todays WSJ. So if you live on the West Coast stick with your broker of choice, at least for now. BofA does offer 10 dollar trades for balances less than 25 grand (500 minimum) regardless of where you live so that is comparable to AMTD (2 grand minimum). I am checking out the fine print in regards to OTCBB stocks because even Scottrade can kill you with commish on those. So far, if you want to trade pennies and only have a couple grand, AMTD is the way to go as far as I can tell. BTW I don't trade pennies but I know alot of people here do.

[spanky]

I had a really bad experience with them and my business credit card account I'm required to use for business trips. I wrote the check for $500 to pay my bill, they pulled $1,500 from my account, and it took 2 months to get my money back. The entire time they said they did nothing wrong, even when I filed a complaint through my company. And not one dime of interest paid for having my $1,000 for 2 months.

I wouldn't give BoA business even if it wasn't my money. They stink.

[aiki14]

Here's what Merrill Had to say this morning:

Securities Broker/Dealer: Online Broker pricing fears overdone;
Subject: Industry Overview
o We are not bracing for open warfare in pricing
BofA's announcement of limited free online equity trades for customers with at
least $25K in deposits is the latest exhibit in a well-documented long-term
online broker commission pricing trend. That being said, while we expect
commission rates to continue to decline at a 10% annual rate, we are not
bracing for significant near-term pricing changes in the wake of this move.
Industry and customer value pivot less and less on trading
In the aggregate, online retail trading commissions generated just 23% of 1H'06
revenue for AMTD, ET and SCHW. Excluding active traders, a segment not
targeted by BofA's move, trading revenue from the typical online customer
probably constitutes less than 15% of the group's revenue base. Given that
the average customer trades just 2-3 times per quarter, the limited savings
available from "free" trading must be weighed in the context of a diversified
suite of cash and investment offerings that are far more central to the value
proposition for both the industry and customer alike.
See 10-16% EPS downside in "worst-case" scenario
We are maintaining our estimates as they already reflect a base-line assumption
of 10% annual commission erosion and low single-digit account growth. That
being said, sensitivity analysis indicates relatively manageable EPS downside
of 10-16% from a 50% reduction in commission rates for non-active traders.
AMTD: low-end valuation, long-term asset gatherer
We like AMTD's (C-1-9; $16.82) balance of near-term earnings drivers (owing to
conservative organic growth guidance in context of projected merger cost
savings) and long-term asset-gathering capacity. We believe stock has
sufficiently discounted pricing vulnerability from current transaction revenue
mix and now trades at low-end of peer group before adjusting for either
run-rate cost base (post merger integration) or calendar FY composition.
Overview

See "Online Broker pricing primer" (4/17/06) for an in-depth review of industry
pricing.See "Online Brokers - 3Q06 preview, 2Q06 review" (9/27/06) for most
recent industry overview and near-term EPS outlook.

Bank of America announced that customers with at least $25,000 in deposits will
qualify for up to 30 free equity trades per month. This compares to typical
online broker commission rates of $7 to $13 per trade. We are inclined to
view BAC's move as a reaction to effective asset gathering strategies by
online brokers over the past several years which have helped the group grow
market share at the expense of full-service brokers and retail banks.

[aiki14]

This is from Dow Jones News Plus yesterday afternoon:

Bank of America Brokerage Fee Plan Rattles Rivals
By Jed Horowitz
Of DOW JONES NEWSWIRES

NEW YORK -- Bank of America's (BAC) offer of free online stock trades is unlikely to attract hordes of customers, but investors worried it could reignite a commission war that hurts discount brokers' earnings.



Banc of America Investment Services introduced the no-fee trading plan in New York and other East Coast cities on Wednesday with plans to roll it out nationwide by February. Customers with a combined $25,000 in certificates of deposits, savings and checking accounts can make up to 30 free stock trades per month under the plan.



Commission-free offers have been made before, mainly from upstart brokers who didn't inspire confidence or from big banks such as Wells Fargo (WFC) that didn't aggressively push their products. Bank of America's nationwide clout, however, could mean its move has more impact.



The announcement contributed to a steep decline in discount brokers' stocks. Shares of E*Trade Financial Corp. (ET) plunged 8.8%, or $2.15, to $22.31, and Charles Schwab Corp. (SCHW) closed down 4.7%, or 84 cents, at $17.22. TD Ameritrade Holdings (AMTD) shares fell 11.9%, or $2.28, to $16.82.



Shares of Schwab weren't hit as hard as its discount rivals, because it has diversified into money management, mutual funds and services to financial planners, said Brad Hintz, an analyst at Sanford C. Bernstein, who doesn't own discount broker shares. Only 17% of Schwab's revenues last quarter came from trading commissions.



"Pandora's Box"


Schwab and its rivals in recent years have lowered their commission fees from about $30 a share to $10 or less for most customers, hurting commission revenue but making incremental adjustments less of an issue, Hintz said. He and other analysts nevertheless expect online brokers to again adjust commissions downward in coming months in the shadow of Bank of America.



"I think it opens a Pandora's box," said David Trone, an analyst at Fox-Pitt Kelton who does not own shares of the bank or the discount brokers he follows. "The online brokers will sit back over the next few months to see the reception, then come up with their own free-trade offer of some sort."



E*Trade, Schwab, Ameritrade and Fidelity Brokerage said Wednesday they aren't rushing to match Bank of America's new offer.



"It's nothing new, and I don't think it impacts anything in the market," E*Trade President Jarrett Lilien said of the rival plan in a phone interview. "We have no plan to change our rates."



Adam Banker, a spokesman at mutual fund giant Fidelity Investments, said its online brokerage unit is "always evaluating our pricing, but we have no changes to announce at this time." Fidelity has more than 10 million active online accounts, the largest in the industry, compared with 430,000 at Banc of America Investment Services.



"Free trade offers have been around for quite some time in the marketplace, both from Schwab and from other institutions," Schwab Chief Executive Charles Schwab said in an emailed statement. "We don't have any plans to change our pricing at this time."



Ameritrade spokeswoman Kim Hillyer likewise said the company has no immediate plans to change its flat $9.99-a-trade pricing plan but will monitor the bank's effect on market share and customer demands.



Bank of America, the second biggest bank in the U.S. by market value, said millions of current brokerage and banking clients would qualify for its no-fee offer. Nationwide, 52 million households have at least $25,000 of assets available to invest, according to the bank.



The cheapest commission offered by Fidelity's Personal Investments unit is $8 per trade for customers who make 120 trades a year and have $25,000 in household assets at the firm. Customers with $1 million or more at Fidelity also qualify for the lowest rate. TD Ameritrade charges a flat $9.99 rate for all customers, while Schwab's online rates range from $9.95 for customers with $1 million of assets at the firm to $12.95.



Luring Deposits


Bank of America's no-commission plan, marketed jointly through its consumer banking and brokerage arm, is aimed as much at attracting deposits as in promoting online trading. Aggregate gains from broadening customer relations will outweigh declines in trading revenue, Bank of America officials said, though they wouldn't discuss budgeted numbers.



"The structure of this offer will bring more revenue to the deposit line than we will ever lose from the revenue line from the trades themselves," Brian Moynihan, president of the bank's global wealth and investment management unit, said in a conference call with reporters Wednesday morning.



Bank of America executives said the new pricing will have no material effect on earnings. The bank unit that includes the brokerage business contributed just 4.6% of the bank's $5.5 billion of profit in the second-quarter. Bank of America shares lost 1.1%, or 59 cents, to close at $54.04.



The no-fee strategy represents "a characteristically innovative marketing approach" evocative of Bank of America's 2002 elimination of fees for its online banking services, Friedman, Billings, Ramsey analyst Gary Townsend wrote in a note to investors. Townsend doesn't own shares of the bank.



Discount brokers in recent years have been adding their own bank-like products to attract investors and build revenues during difficult market cycles. E*Trade and Schwab opened FDIC-insured banks in the past few years to take deposits and have begun offering mortgages and other traditional bank products to customers.



E*Trade generally pays higher interest rates on deposit products at its bank than does Bank of America, which "is not known for being a rate leader," Lilien said.



"Some of the larger online broker firms are starting to look a lot like banks, so the banks are a little nervous and want to have good online offerings to combat that," said David Kalt, chief executive of discount broker OptionsXpress (OXPS).



But active online traders already pay such low commissions that the zero-pay option at Bank of America won't make much difference to them if they get superior research, execution or modeling services from other firms, Kalt said. About 75% of OptionsExpress's trading involves options, which aren't covered by Bank of America's no-fee plan. Shares of OptionsExpress closed down 3.3%, or 94 cents, at $27.57.



Significant Savings For Some


Trone said investors who make 10 or more trades a month can realize "pretty significant" savings from eliminating commissions that will outweigh the burden of keeping $25,000 in a low-interest account. Bank of America's trade-execution capabilities may not be state-of-the-art, he added, "but they are in the ballpark."



Banks as well as securities firms have been pushing aggressively to attract a broad range of assets from clients and alter U.S. consumers' predilection to segregate their banking from their investment assets. Most brokerage firms now encourage clients to consider paying an annual fee based on assets at the firm in lieu of per-trade commissions.



Bank of America's $25,000 minimum deposit balance "is actually a relatively high hurdle" for infrequent traders, who must decide whether it is worth the "hassle" and inconvenience of closing accounts at other firms, Trone wrote. Most discount brokerage customers trade infrequently, which means the Bank of America program is unlikely to spur mass movements from rivals, he added.



Customers of TD Ameritrade, E*Trade and Schwab average about 2.5 trades a quarter, according to estimates from Sandler O'Neill & Partners analyst Richard Repetto cited in Wednesday's Wall Street Journal. But investors believe the high 30-trade per month no-fee offer will appeal to active traders.



Fees for trades beyond Bank of America's monthly limit revert to current levels of $5 to $10 per trade for bank customers, depending on balances and trading activity levels. Online customers without any deposit relationship pay $14 a trade.



The zero-fee plan doesn't apply to margin account trades or option trades. Other standard transfer, processing and maintenance fees will continue, the bank said.



Bank of America accompanied its announcement in New York City with a lavish marketing campaign that included three double-decker buses with brass bands, red-vested "ambassadors" on bicycles and at subway stops handing out brochures and rubber balls stamped with the trading Web site name, demonstrations of how to register and trade online, and bank officers presiding at the opening bell-ringing ceremony at the New York Stock Exchange.


-By Jed Horowitz, Dow Jones Newswires; 201-938-4047; jed.horowitz@dowjones.com