Fidelity drops price for stock trading

By Todd Wallack, Globe Staff

Is a price war breaking out in the on-line brokerage market?

Boston-based Fidelity Investments, which had charged customers between $8 to $19.95 to trade stocks, said today it will now offer US customers a flat rate of $7.95 per trade.

"It clearly puts us heads and shoulders above our on-line competitors," said Kathleen Murphy, president of Fidelity Personal Investing. "In terms of major competitors, we have the most attractive price."

The announcement comes a month after rival Charles Schwab & Co. lowered its on-line prices to $8.95 per trade. Most clients previously paid $12.95 per trade. TD Ameritrade, Fidelity’s largest brokerage competitor, charges $9.99 per trade. Etrade charges customers between $7.99 to $12.99 per trade, depending on how much trading they do. Some smaller rivals are still cheaper. Scottrade, for instance, charges $7 per trade.

But James Burton, president of Fidelity's Retail Brokerage unit, argued that Fidelity offered the best "value" when you factor its other services to customers. Fidelity, which had 12.4 million retail brokerage accounts at the end of 2009, declined to say how much customers currently pay on average to trade stocks, but said the price cut will affect a significant portion of trades.

The price change will likely make the biggest difference for small investors who make infrequent trades. Those customers, who had been paying as much as $19.95 per trade, will see their trading costs drop by as much as 60 percent, Fidelity said.

Also today, Fidelity announced a partnership with BlackRock to offer customers commission-free trades for 25 Exchange Traded Funds, or ETFs. The index funds are part of the iShares Funds family.

Fidelity has lagged behind some other mutual fund companies in launching its own ETFs.

Fidelity estimates it had 22.2 percent of the market shared by the four largest on-line brokerage companies in the fourth quarter of 2009, up from 20.3 percent four years earlier.