UPDATE 4-Fidelity cuts fees amid brokerage price war

* Fidelity cuts online commissions to $7.95 per trade

* Move follows Schwab’s cut to $8.95 in January

* Ameritrade CEO says may match cuts for top clients

* Fidelity plans ad campaign for BlackRock iShares funds

* Shares of rival online trading businesses fall
(Adds E*Trade comment, updates share prices)

By Ross Kerber and Jonathan Spicer

BOSTON/NEW YORK, Feb 2 (BestGrowthStock) – Fidelity Investments
said on Tuesday it plans sharp price reductions for U.S. online
equity trading, the latest move in a price war among retail
brokerages that drove down shares of several other firms.

Fidelity, the Boston-based mutual fund powerhouse, also
said it plans to waive trading fees for 25 exchange-traded
funds offered by BlackRock Inc’s (BLK.N: ) iShares unit — a
striking partnership as Fidelity to date has largely avoided
the fast-growing ETF space.

Both steps reflect the efforts of online brokerages to
capture market share as retail investors rebalance their
portfolios amid uncertain markets.

Broadly, the industry seems to be shifting to an equal-fee
model that could benefit smaller investors, who in the past
have paid more than traders with more assets or higher trading
volumes.

As of Feb. 3 Fidelity, one of the country’s largest online
brokerages, will charge $7.95 per trade for U.S. equities, down
from a previous tiered fee structure of $8 to $19.95 per
trade.

The new flat rate is $1 per trade lower than the reduced
rate announced last month by the largest online broker, Charles
Schwab Corp (SCHW.O: ).

Analysts had expected rivals to match Schwab, whose move
had been seen as a grab for greater market share in the online
brokerage industry as it slowed late last year. While trading
volumes jumped in January, low interest rates have continued to
hurt brokers’ interest-based revenue.

Another big player, TD Ameritrade Holding Corp (AMTD.O: ),
has charged a flat $9.99 per trade rate since 2006.

A spokeswoman for E*Trade Financial Corp (ETFC.O: ) said on
Tuesday it is not changing its pricing, which starts at $12.99
per trade but drops for clients who make more than 30 trades
per quarter or keep more than $50,000 in assets.

Speaking at a Morgan Stanley investment conference on
Tuesday after Fidelity’s news, TD Ameritrade Chief Executive
Fred Tomczyk said his company is prepared to match Fidelity’s
$7.95 price per trade, at least for what he called “key
clients.”

But Tomczyk added that the company sees no reason to change
its fees now and called changes by others “a zero sum game”
likely to reduce profits for all.

The markets bore out this view, as the move by closely held
Fidelity sent shares of rivals down in Tuesday trading.

Shares of TD Ameritrade fell 2.7 percent; shares of E*Trade
were down 1.3 percent, and Schwab’s shares were down 1.0
percent in afternoon trading.

Collins Stewart analyst William Tanona wrote in a note to
investors on Tuesday: “Pricing wars are generally a no-win
situation for the industry because these price reductions are
generally met by others in the industry, and therefore do not
result in market share gains but place pressure on commission
revenues.”

On a conference call with reporters, Kathleen Murphy,
president of Fidelity’s personal investing unit, took aim at
rivals.

“Clearly, this puts us head and shoulders above our major
online brokerage competitors,” she said.

The move is also a partial answer to analysts who have
wondered whether Fidelity would soon offer more ETFs in
addition to the solitary one it now has. Retail investors have
stuffed money into the vehicles, which feature low fees and tax
benefits and have grown 145 percent since 2005 to more than $1
trillion in assets, according to BlackRock figures.

Schwab introduced its own line of eight index-tracking ETFs
in November and allowed its customers to trade them
commission-free online.

Fidelity President Rodger Lawson has dismissed ETFs in past
interviews, noting their low profit margins. He said Fidelity
did not bid on the iShares business that BlackRock bought as
part of its $13.5 billion deal for Barclays Global Investors
last summer.

Murphy said Fidelity has decided to partner with BlackRock
as the largest provider of passively managed ETFs.

It already resells the full line-up of iShares ETFs, but
Fidelity now will waive trading fees on 25 iShares funds that
have proven popular with customers. The companies also will
begin advertising the products, Murphy said, without offering
details of how much spending would be involved.

Asked if Fidelity might introduce actively managed ETFs,
she said: “We are looking at that, particularly as we are the
largest active management company,” a reference to Fidelity’s
huge slate of traditional mutual funds.

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(Reporting by Ross Kerber; additional reporting by Jonathan
Spicer; editing by John Wallace and Gerald E. McCormick)

UPDATE 4-Fidelity cuts fees amid brokerage price war