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 contract
With 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.