TD Ameritrade Expands Commission-Free ETFs

February 1, 2018 — 3:45 PM EST

Low-cost investing is all the rage, with discount brokerage after discount brokerage offering breaks on trades and commission-free exchange-traded funds (ETFs). Aiming to keep up the momentum TD Ameritrade has been enjoying, the Omaha, Nebraska-based discount brokerage expanded its commission-free ETF offering.

According to TD Ameritrade Holding Corporation (AMTD), the company has added 24 commission-free ETFs to its ETF Market Center, bringing the total number of ETFs that don't have a commission attached to them to 320. The brokerage also added USSA as an ETF provider in its ETF Market Center. The company said that it tripled the number of commission-free ETFs in October of last year, and this latest move builds on that effort. After the overhaul, the company said that ETF Market Center commission-free ETF balances grew by about $8 billion. In addition to USSA, the expanded list includes ETFs from providers such as BlackRock, Inc.'s (BLK) iShares, State Street Global Advisors and Wisdom Tree.

"We are continuing to improve our ETF offering in order to provide our clients with the resources they need to make investment decisions that are right for them," said Keith Denerstein, director of guidance product management for TD Ameritrade.

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When TD Ameritrade overhauled its commission-free ETF platform in October, many saw it as a way to monetize ETF investing and shined a light on a growing trend in which fund creators pay to get prime placement for their investment products with the brokerage houses. While "paying for shelf space" is a common practice in the mutual fund world, only recently have ETF providers adopted the practice, according to The Wall Street Journal. These funds already have low costs associated with them and are being offered by a handful of discount brokers without any commissions.

Because these funds aren't bringing in much revenue in the form of fees for the likes of TD Ameritrade, Charles Schwab, and E*TRADE, a lot of the discount brokers will share in the fees the funds do generate. TD Ameritrade has long been a holdout, but the pressure to monetize prompted a deal with State Street Global Advisors last year to offer its low-cost ETFs commission free through the TD Ameritrade ETF Market Center. This comes as TD Ameritrade is seeing strong growth and record trading activity. In January, the company's Chief Executive Timothy Hockey said that average daily trades are close to 1 million.

TD Ameritrade isn't the only firm that has expanded its offering of commission-free ETFs in recent weeks. In early January, rival The Charles Schwab Corporation (SCHW) announced that it was adding 12 new ETFs to its commission-free platform. All told, Schwab customers have access to 245 ETFs that don't have a commission attached to them. Overall, there are currently more than 1,700 ETFs for investors to choose from – and that's in the U.S. alone.