Discount brokerage Zecco Trading announced this weekend that effectively immediately, they will no longer offer 10 free trades per month for those with assets of $25,000 and over. Here is partial text from the e-mail:
Starting on March 30, 2011, our new commission rates will be:
* Equity trades: $4.95 per trade*
* Options trades: $4.95 per trade, plus $0.65 per contractWith this change we are no longer offering 10 free trades per month. As before, there are no minimum balance requirements or inactivity fees to open or maintain a Zecco Trading account.
The change is effective immediately for all new customers who have not fully opened their account.
Thus ends the final chapter of their “free trades” motto. Let’s not forget that Zecco stood for Zero Cost Commissions. Starting out in 2006, we got 40 trades per month for a balance of $1,000 or $2,500 (I forget). Then that was lowered to 10 free trades per month to balances of $2,500+. Then it was 10 free/mo for balances of $25,000+. I had a lot of hope for the business model behind the free trade community vision of Zecco, and it’s sad to see it end.
But here’s the harsh reality. If you’re going to offer free trades, you’re gonna have to make the money up elsewhere. Historically, a huge source of revenue for discount brokers has been earning interest on idle cash balances. With interest rates being so low, this source of income has dried up. Trading volume is down, so there are less people exceeding the 10 per month limit and paying up for additional trades.
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Did other customers receive an email? I wasn’t notified about this change. I’ll likely look to move my account… but where to?
Previously I thought Wells Trade was offering free trades for accounts with balances over $25,000. But with them you need a checking account and they also seem to have some other miscellaneous fees associated with big banks.
Really it wasn’t about the factors you said that led Zecco to screw their customers with a bait and switch. They completely abandoned their business model of being a no frills brokerage. They spent tons of money developing fancy tools and iphone and ipad apps. This is all what zecco customers did not want, if they wanted it they would have just used Etrade or one of the other main brokerages. Now Zecco is just like all the other high cost brokerages with extra crap we don’t need. They abandoned their principles and I hope they pay dearly for it.
My email states:
Starting on March 30, 2011, our new commission rates will be:
* Equity trades: $4.95 per trade*
* Options trades: $4.95 per trade, plus $0.65 per contract
@Steve – Check out these alternatives in my next post:
https://www.mymoneyblog.com/low-cost-stock-broker-alternatives-2011.html
Yes, I have a WellsTrade account open but haven’t opened up the PMA checking account either to get the 100 free trades. I don’t know what the hoops are exactly, but hope to share after if I eventually go through the process.
@jon – I think the fancy tools were just camouflage excuses for them losing tons of money. The Forex thing was kind of a hail mary IMO. I don’t think an iPad app costs all that much, and it’s a one-time investment that can bring in more trade revenue. They did upgrade their customer service and that added to their bottom line, so I agree with you on that aspect.
@L – Thanks for sharing. If you have 30 days of free trades, you may decide to use that to sell your positions and move cash out if the taxes aren’t a huge hit.