Vanguard Cuts Commissions on ETFs, Stock Trades

To keep up with competitors, the Vanguard Group announced Tuesday that it has reduced commissions associated with its exchange-traded funds and stock trades.

Valley Forge, Pa.-based Vanguard said it would offer commission-free trading to its brokerage clients that use its lineups of 46 proprietary ETFs. The company will also offer its customers $7 trades on stocks and $2 trades on non-proprietary ETFs.

“For 35 years, Vanguard has been committed to reducing the cost of investing in mutual funds for our clients. Now Vanguard is expanding our low-cost commitment to ETFs,” said CEO William McNabb.

Vanguard’s move comes just a few months after Charles Schwab reduced commissions on online equity and non-Schwab ETF trades to $8.95. Schwab offered commission-free trading when it launched its proprietary ETF family last year.

Vanguard spokesman John Woerth said the company’s decision to lower costs was not an effort to chase the competition, but that growth within its ETF fund families and the ability to self-clear enabled the company to cut commissions.

Vanguard said that unlike some competitors, the same commissions apply to both online transactions and those executed with a Vanguard brokerage representative.

“Our commission-free offer is not intended to encourage the active trading of ETFs, which we believe is counterproductive and rarely successful,” McNabb added. “Rather, it enables investors to construct a balanced, long-term portfolio of low-cost Vanguard ETFs and add to the portfolio regularly.”

Vanguard is the third largest ETF manager with 12.9% of assets. BlackRock manages 47.8% of all ETF assets and State Street Corp. has a 23.3% market share.