Ally Invest, a subsidiary of Ally Bank (NYSE: ALLY), which was formerly part of captive finance company "General Motors Acceptance Corporation", announced as part of the wave of cost cuts sweeping over the brokerage industry, that they will cut their base commissions for stocks and ETFs to zero, effective October 9, 2019. The firm is also eliminating the per-leg commission for options trades, charging $0.50 per leg.
The wave started to break last week when Interactive Brokers launched their new service, IBKR Lite. Then Charles Schwab announced that the firm would eliminate stock, ETF, and per-leg options commissions, effective October 7. Then the deluge began: TD Ameritrade and E*TRADE followed suit, and TradeStation announced their own no-commission offering TSgo.
Ally Bank reports that their commission revenues accounted for less than 4% of their total revenue for the six months ending June 30, 2019, which includes interest earned on loans as well as insurance premiums. Eliminating these base commissions will not have a huge effect on their bottom line.
Lule Demmissie, president of Ally Invest, says in a press release, “At Ally Invest, we’ve been planning for this evolution to democratize investing and are happy to be in the company of firms prepared to offer customers zero commission trading, while continuing to deliver an outstanding customer experience with a host of innovative investing and banking offerings.”
Who has not yet joined the commission-cutting party? At this point, Vanguard represents the most expensive brokerage commission, at $7 per stock/ETF transaction. The majority of trades made by Vanguard clients are in the firm's proprietary ETFs, which trade commission-free anyway.
Of course, industry watchers are waiting for Fidelity to make a move as well. So far, the $2.5 trillion money manager has been silent as the industry arounds it undergoes a tectonic shift.