What was changed
Robinhood’s launch of a commission‑free mobile trading app in 2015 attracted millions of retail investors and put pressure on traditional brokers that charged $4.99‑$9.99 per online trade. By 2019, Robinhood’s valuation had risen to $7.6 billion, and incumbents such as Charles Schwab faced the prospect of losing customers to the low‑cost newcomer.
In October 2019 Charles Schwab announced it would reduce its online trading commissions to zero for U.S.‑listed stocks and ETFs, following similar moves by Interactive Brokers and J.P. Morgan Chase. The decision helped Schwab keep its trading volume stable and prompted a broader industry shift toward zero‑commission retail trading.
What it achieved
Schwab retained its retail trading base and prevented further outflows to low‑cost rivals, keeping its market share in the growing discount brokerage segment.
Why it worked
Robinhood’s rapid user growth demonstrated a clear demand for free trades, threatening Schwab’s fee‑based revenue.
Schwab’s leadership feared a mass migration of retail traders to the startup if it did not match the zero‑price offering.
The move allowed Schwab to compete on price while continuing to monetize through asset‑management fees, order flow revenue and premium services.
What can be applied
Incumbent firms can preempt disruptive pricing by matching zero‑cost models quickly, protecting customer loyalty without needing to migrate to a new platform.
Aftermath
After Schwab’s announcement, other major brokers quickly followed suit, cementing zero‑commission trading as the new industry standard. Schwab’s trading revenue declined but was offset by growth in its advisory and asset‑management businesses, and the firm retained its position as one of the largest U.S. retail brokers.
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