The End of Trading Fees: How US Stock Markets Changed the Game for Investors

The US stock brokerage industry underwent a seismic shift in late 2019 when major players like Schwab, TD Ameritrade, and E*TRADE abruptly scrapped their long-standing commission structures. What was once standard practice—charging anywhere from $4.95 to $6.95 per trade—suddenly vanished from these platforms. This shift didn’t happen in a vacuum; it represented a fundamental restructuring of how US brokers monetize their services.

Why the Fee Revolution Actually Happened

When Robinhood first introduced commission-free stock trading years earlier, many thought it was a niche strategy for a specific market segment. The company operated a stripped-down platform after all, lacking the research tools, educational resources, and specialized account types that traditional brokers offered. Interactive Brokers followed suit, though it traditionally served experienced traders rather than everyday investors.

The real shocker came when Schwab—one of the industry titans—decided to eliminate its $4.95 commission structure entirely. Within weeks, this decision triggered a domino effect across the US brokerage landscape. TD Ameritrade, E*TRADE, Fidelity, and Bank of America all scrambled to match the move. By the end of 2019, zero-commission trading had become the industry standard rather than a competitive differentiator.

Two factors explain this rapid transformation. First, once Schwab moved, other brokers faced an existential threat. Maintaining commissions would mean losing clients to competitors offering free trades. Second, and more importantly, trading commissions never represented the primary revenue stream for any major broker. Commission fees were always just one piece of a larger puzzle.

Following the Money: How Brokers Still Profit

Understanding broker economics reveals why eliminating commissions doesn’t spell doom for these companies. Take TD Ameritrade—one of the more commission-dependent brokers in the US market. Trading commissions accounted for just over 25% of their revenue in recent quarters. The remaining 75% came from diversified sources: interest on margin loans, fees from bank deposit accounts, revenue from proprietary investment products including robo-advisory services, and payment for order flow.

The order flow revenue deserves closer attention. When brokers route orders to market makers—the entities actually executing trades—they receive compensation. Market makers profit from the spread between bid and ask prices, and they’re willing to share those gains with brokers who send them volume. These spreads are measured in pennies, but at scale, they generate substantial income.

It’s worth noting that the zero-commission structure isn’t entirely universal. Many brokers still charge fees for options trading, broker-assisted trades, and phone-initiated orders. In some cases, eliminating stock trading commissions actually benefits brokers by attracting assets. When investors can access feature-rich platforms from TD Ameritrade, E*TRADE, or Schwab at the same cost as Robinhood’s basic interface, wealth migration follows.

The Real Winners: Retail Investors in the US Market

For individual investors, particularly those just starting out, zero-commission trading represents a genuine breakthrough. Small-scale investing becomes economically viable for the first time.

Consider a practical scenario: Apple stock trading at $200 per share. Under the old commission structure, a $6.95 fee meant paying a 3.5% premium just to enter the position—economically irrational for a single share purchase. Today, that transaction costs nothing. Similarly, a $50 dividend used to face the same commission barrier, forcing investors into dividend reinvestment plans (DRIPs) or hoarding cash until amounts justified trading costs. This friction has evaporated.

Diversification becomes genuinely accessible for investors with modest capital. A $1,000 initial investment can now be split across five different stocks without commission erosion.

Quantifying the Long-Term Impact

The cumulative effect of commission elimination on investment returns is striking. Imagine investing $1,000 annually across five stocks, with each allocation historically bearing a $6.95 commission (roughly $35 per investment round). Assume a 10% annualized return.

With commissions, you’re effectively deploying $965 each year, not the full $1,000. After 10 years, this results in a portfolio worth approximately $15,400. At 20 years: $55,300. At 30 years: $158,700.

Without commissions, the full $1,000 works for you every time. The difference seems minor—just $6.95—but compounding reveals its true impact. Over 10 years, you’d accumulate an extra $560. Over 20 years, that gap widens to $2,000. After 30 years, commission-free investing yields nearly $5,800 in additional wealth compared to the commission scenario.

This isn’t merely about saved fees—it’s about opportunity cost and compound growth. Every dollar that previously went to brokers now remains in your portfolio, generating returns on returns.

What’s Next for US Brokers: The Fractional Shares Frontier

Fee compression in the investment industry has been a decades-long trend. It wasn’t that long ago when $50 commissions were routine. Mutual fund expense ratios have similarly declined. As zero commissions become table stakes, brokers must innovate elsewhere to maintain competitive differentiation.

Fractional shares represent the logical next frontier. Imagine owning 1.5 shares of a $100 stock by deploying $150 of capital. Currently, investors can access fractional shares through DRIP programs, but not as standalone transactions. Schwab has already announced fractional share capabilities, and competitors will inevitably follow.

This development further democratizes market access, particularly for investors tracking expensive stocks or building globally diversified portfolios.

The Behavioral Trap: Over-Trading Without Cost Friction

While zero-commission trading overwhelmingly benefits investors, one psychological danger deserves highlighting: the temptation to over-trade.

The absence of transaction costs can create the illusion that frequent trading is harmless. It’s not. Over-trading dilutes returns through market timing mistakes, bid-ask spread costs (which still exist), potential tax inefficiency, and simple opportunity cost. The lack of commission shouldn’t drive trading decisions. Legitimate reasons to sell stocks exist—rebalancing, fundamental deterioration, changed financial circumstances—but “it’s free” shouldn’t be one of them.

Successful investing in US markets remains fundamentally about long-term wealth accumulation, not frequent position churning. Commission elimination removes a financial barrier to excess trading but shouldn’t remove your behavioral discipline.

The Broader Implication

The shift to zero-commission trading in US markets represents more than just fee elimination. It reflects how competitive pressure, technology, and evolving business models reshape entire industries. For individual investors, this transformation has been unambiguously positive—lower costs mean higher long-term wealth accumulation.

The key is recognizing this advantage for what it is: an opportunity to invest more of your capital for longer periods. Use it wisely, and the effects compound powerfully over decades.