Friday, October 22, 2010
TD Ameritrade Launches Free ETFs
The online brokerage giant joins the commission-cutting fray with the largest assortment of funds yet. Also, a Website upgrade from Firstrade.
FINALLY JOINING THE free-trade fray, TD Ameritrade has begun to allow customers to trade about 100 exchange-traded funds without paying commissions. Other big-name brokers rolled out free ETF trades earlier this year, but TD Ameritrade (ticker: AMTD) is offering significantly more funds. The firm didn’t, however, couple the free ETF trades with a general cut in commissions.
There are other catches, mostly to keep frequent traders from overwhelming the system. You have to hold the ETF for at least 30 days to get the commission waived; otherwise, it’s the usual $9.99 fee for a stock or ETF transaction. As CEO Fred Tomczyk says, “We haven’t lost our minds here.”
The free ETFs are part of the rollout of TD Ameritrade’s (http://www.tdameritrade.com) ETF Market Center, many of whose functions can be used by non-customers. The center is modeled on a similar product for mutual funds. It includes lists of “premier” funds, as well as screeners and other tools. To see the screener’s results, though, you must log into a TD Ameritrade account.
Tomczyk says that TD Ameritrade began participating in the exchange-traded fund market in 2004, when its Amerivest online advisory unit focused on ETF strategies.
The funds that can be traded commission-free were selected by an investment consulting unit of Morningstar and include ETFs from iShares, Vanguard, State Street, PowerShares, and others. In comparison, Schwab’s free ETFs include only 11 of its own funds. Similarly, Vanguard offers 62 Vanguard ETFs for free.
Though late to the table, TD Ameritrade is serving up heftier portions than its rivals. The next course could be interesting.
ALSO A BIT OVERDUE, Firstrade (http://www.firstrade.com) has redesigned its Website, which, in our view, had gotten tired in recent years. We were also disappointed that the data displayed were delayed; real-time info is important for making trading decisions.
All that is due to change on Oct. 20, when Firstrade launches an update that highlights speed, user interface, flexibility and customization. We were shown the new platform in early October while it was still in a beta test in a closed environment. It’s a straight browser-based trading application; no need to download applications or launch tools in a separate window.
The landing page you see when you log in is divided into two columns. The left side focuses on the investor’s account and has a drop-down selector so you can switch between accounts quickly. The right column focuses on markets—showing news, quotes and graphs. The columns can be collapsed or expanded, and the various boxes displaying data can be moved around.
At the bottom of every page is a simple order-entry ticket for stocks or single-leg options. On the far right is a box where you can see real-time positions, balances, open orders and executions.
“We wanted to make it convenient for customers to not only place orders, but be able to get quotes and research,” says the Firstrade vice president of business development, C.S. Hsia.
You can customize the columns displayed on the positions page. As you choose column headers and move them around, you can see a preview of the resulting report. The site also features newly designed stock, mutual-fund and ETF screeners.
Firstrade also has added the ability to place conditional orders, such as one-triggers-another and one-cancels-another. Although these features have been available on other sites for years, Hsia says that Firstrade’s conditional orders are stored in its own servers, which means they can be checked with every tick. Some broker sites review them only every minute, which can lead to trades that don’t fit your criteria.
One area still in need of some help is options trading, although the updated options chains are nicely displayed. The order ticket allows you to place only a stock order or a one- or two-legged options order, so the more complicated spreads have to be entered as a series of orders. This is a pretty major shortcoming.
The new platform does take a step into the community area. When an order is executed, you can tweet it or post it to Facebook. You can set your sharing posts to hide the quantity and/or execution price, and you can add a note that includes your rationale. On Facebook, Firstrade shows how many people have shared trades that day, and it can show your friends’ activity.
Commissions remain the same—$6.95 for a stock transaction and $6.95, plus 75 cents per contract for options.
Firstrade has taken a big step in the right direction, but there’s still a ways to go.
Published in Barron’s, October 18, 2010.