TD Ameritrade launched a massive new zero-commission ETF trading platform in early October, becoming the fourth major brokerage center to eliminate commissions on certain ETF trades. The new platform allows investors to purchase more than 100 ETFs commission free, including funds from Vanguard, State Street Global Advisors, PowerShares and iShares.
TD’s program is far more comprehensive than current offerings from other providers. Last year, Charles Schwab became the first major brokerage to offer zero-commission trading, waiving commissions for its family of Schwab ETFs; currently, Schwab offers 11 ETFs. Fidelity came next, striking a deal with iShares to offer 25 ETFs commission free. Vanguard then waived commissions for brokerage customers who bought any of the 68 Vanguard-listed ETFs.
TD’s program breaks the mold by not aligning itself with any provider and by offering access to so many funds. The program includes a fairly comprehensive list of U.S. equity, international equity and fixed-income ETFs, with a smattering of commodities. Notably missing from the offering are gold bullion ETFs and sector funds.
Commission-free trading programs are designed in part to make ETFs more palatable to individual investors, who can be dissuaded from investing in ETFs by commission costs.
The ETFs in the TD Ameritrade program were selected by Morningstar Associates LLC, a registered investment adviser and unit of Morningstar.
The TD Ameritrade program has an important catch: An investor who buys a fund and then sells it within 30 days will be charged a short-term trading fee. The program is designed to help long-term investors access the ETF space.