here is the actual article about the price war breaking out. Price war erupts as Bank of America offers free online stock trades Posted 10/11/2006 10:40 PM ET E-mail | Save | Print | Reprints & Permissions | Subscribe to stories like this By Matt Krantz, USA TODAY Bank of America (BAC) stunned the online brokerage industry Wednesday by offering free stock trades to anyone who has $25,000 in a checking, savings or money market account at the bank. That came just days after Ontario, Calif.-based upstart Zecco.com offered free trades to anyone with a $2,500 account. Online brokers suddenly find themselves under attack in a price war. That's a reversal of the dot-com boom, when online brokers such as TD Ameritrade (AMTD) and E-Trade (ET) stormed Wall Street by offering commissions just a fraction of those charged by big brokers. And now the likes of E-Trade and Ameritrade could be pressured to come up with their own free-trade offers, says David Trone, analyst at Fox-Pitt Kelton. That prospect didn't appear to sit well with shareholders Wednesday, as shares of the online brokers tanked. TD Ameritrade fell 12%, E-Trade slid 9%, and Schwab (SCHW) lost 5%. Free commissions have been offered before by companies such as Freetrade.com and a unit of American Express (AXP) (now Ameriprise), but with little success. Ameriprise no longer has the offer and added a $4-a-trade fee for those who originally signed up. Freetrade.com, which TD Ameritrade acquired, has been replaced by a $5-a-trade no-frills service. TD Ameritrade found that offering free trades "doesn't gain significant market share," says TD Ameritrade spokeswoman Katrina Becker. Customers evaluate things other than commissions, such as service, rates of return on cash balances and access to investment advice, says Schwab founder and CEO Charles Schwab in an e-mailed statement. "Knowing there is no free lunch, consumers look carefully at the whole picture." Research shows commissions are key but only one factor, says Chris Musto, general manager of Keynote Systems, which tracks online brokerages. "The broker with the lowest commissions has never been the biggest," he says. Long-term investors who may trade just four or five times a year typically aren't overly concerned about saving $50 a year, says Richard Repetto at Sandler O'Neill. But Musto says free trades can be compelling, and the Bank of America and Zecco plans are different than past attempts, which were barely marketed and limited to just low-cost "market" orders or high-net-worth clients. By placing the deposit requirement at $25,000, Bank of America is offering this to many investors. The offer also includes typically pricier limit orders, which let investors set a price at which they want the trade executed, he says. Bank of America hopes the free trades will lure customers to the bank and its other services, says spokesman John Yiannacopoulos. "Our clients tell us they prefer to have their accounts in one place," he says. And the cost of handling trades has plummeted to the point that offering free commissions is doable, says Jeroen Veth, CEO of Zecco.com. Typically, brokers pay just $2 to put a trade through. He says that cost is easily made up in other ways, such as collecting interest on cash in customer accounts or providing fee services, such as options trading. "Is the timing right? I think so," he says. Posted 10/11/2006 10:40 PM ET