What's up everyone? Ross here from Warrior Trading. So this week TD Ameritrade Well, the stock is down 36% They are having their worst week in more than 20 years and in fact last week the stock was at $50 a share and today it's at $33 That means the market cap of TD Ameritrade has dropped by about 10 billion dollars. So this is some pretty crazy stuff and you know why it's happened Commission wars So the final leg in the race to zero brokers battling it out, undercutting each other, dropping their Commission's which ultimately has been great for us, but has culminated this week with each raid Ameritrade Interactive Brokers and Charles Schwab all announcing zero commissions. You guys can check out the videos on the other brokers in the description.

they're linked below. as always questions comments on this video, please leave them below if you currently trade with a merit trade, I Would love to hear your input on what this change means because ultimately when they drop the Commission's to zero, it has to come at some type of cost and I'm really interested to see what that's gonna be. Now to backtrack just a little bit. We're going to talk about TD Ameritrade but I Want to talk for a second about Robin Hood now Robin Hood Came on the scene in 2013 as a mobile trading app with a headline of invest Commission Free Zero commissions and I remember I was trading then and I remember people saying are you gonna use Robin Hood Robin Hood zero Commission You know it's a no-brainer so of course I Checked it out and what I discovered was that Robin Hood as a mobile app is very cool and it certainly is going to entice a lot of young people to start investing and get interested in the market.

which is great. but ultimately if you're a professional trader in in other words, you're someone who does this for your primary job or to seriously make money. You're not going to use a mobile app, right? I Mean you're gonna get out of it exactly what you would expect. It's it's a mobile app.

It's it's subpar. I Mean you're not going to have level two, you're not gonna have market depth, you're not gonna have hotkeys, and you're not gonna be able to execute orders within a fraction of a second. It's just not going to happen. And so ultimately Robin Hood And we can see the website here.

it shows the picture of you know your iPhone and the fact that you can trade on the mobile app I mean it's cool, but it was never gonna be a real competitor in my mind to a broker. like a trade or a merit trade because it's not a true trading platform. But in fact over the years I think it has drawn some market share from the big brokers. and that's probably because the bulk of the big brokers customers are not traders like me who are trading 3 to 5 times a day.

They're people who put money in and trade every now and then. And so what that means is that they get to sit with these large deposits on their books. Which is good. So in fact, TD Ameritrade has one point three trillion dollars of client assets.

So those are clients that put their money there and they just sit there. And of course Ameritrade is able to have that on their balance sheet, which is for them. You know it's a value to have all of those deposits sitting with them. And so this week Interactive Brokers or is actually Last week they announced their new free commission product offering.

But that product is really to me a direct competitor to Robin Hood because it's a simple app and actually I can put up my let's see, where's my window Oh here's and so Interactive Brokers IBK Our Light is the name of the the new software or the new the new product offering. and basically it says coming in October unlimited Commission Free trading on us listed stocks and you can tell that it's a simple sort of trading app. It doesn't show full market depth, that most likely doesn't have hotkeys. This isn't something that someone who's trading to really make a living on is going to be using.

And if you go down to the bottom on Interactive Brokers you can see the comparison between IBK are Light and IBK are pro. And of course you have to pay for pro. And you guys can check it out in my video specifically on Interactive Brokers. But long story short, they've created just simply a new product offering and the pro version you still have to pay for well Charles Schwab Then up the ante and said, you know what, we're just gonna ditch commissions no matter what.

Now, the thing with Charles Schwab is that only about 8 percent of their revenue comes from Commission's So it's kind of like not as big of a deal for them to make that cut because the bulk of their revenue is related to the assets under management. and you know, investing with Charles Schwab and stuff like that. Well, TD Ameritrade only has one point three trillion dollars in assets client assets, whereas Charles Schwab has nearly four trillion. so they're much bigger in that department.

Now we TD Ameritrade being smaller in the assets and their management, the bulk a bigger percentage of their profit comes from commissions. the exact percentage I'm not sure of, but Ameritrade has said that they expect a fifteen to sixteen percent drop in quarterly revenue as a result of dropping their Commission's to zero dollars per trade, and that's gonna be approximately 200 million dollars. So 200 million dollars is certainly a big hit. But the bigger hit is the fact that their stock is down 36 percent and their market cap has been slashed by ten billion dollars.

Now, one of the things that I'm really interested in and I'm sure you are. If you're an America is what this really means for you. because it's It's one thing just to cut Commission's down to zero. That's great.

But where is that cost saving? Where Where are they gonna make up for that right there. They're losing money on commissions. They've got to make up for somewhere else. Now The couple of things that come to my mind first would be customer support and routing.

Now, customer support. That's kind of a no-brainer A broker like Robin Hood The customer support has never been really really solid. If you're in the middle of a trade and you need to get a hold of someone ASAP it's very difficult. and I've heard that from a lot of students and a lot of traders who use Robin Hood So that's two expected.

But with a mare trade with traders and I know traders who have six-figure accounts there, you expect to be able to get on the phone with them really quickly. And if you're in a bad trade, you lose power and you're in a trade, something happens. You can get out of that trade really quickly. Unfortunately, that all comes at a cost providing great customer support.

You know they've got to spend that money. So now, without the profit from commissions, how are they going to pay for it? So one of the other questions is order routing. So when we're at our orders, when we send our orders to the market, most brokers are using some type of smart routing and so the way the shares are sent to the market and the volume, there's a way that they can send the shares that give them an advantage that give them a little bit of a rebate. And in fact, some brokers even have for a while like Trade 0 for instance has no Ecn fees and no, no commissions as long as you route orders a specific way.

Because if you route them that specific way, then actually I believe they are getting a little bit of a rebate back to them from the market maker. So this is one of the things with trading that you can get paid to provide liquidity to the market right now. For instance, I could get paid about ten fifteen dollars on a ten thousand share position if I route it the right way, I'll get paid to do that. And so now if brokers start collecting all of those payments on your orders, well that will make up the difference.

However, the route that gives them the most money and that method of routing is not always going to be favorable for you in terms of execution, speed, and execution quality. And so when you think about over the course of weeks, months, or years of trading, the difference in execution if it amounts to a one cent, a two Center imagine a five cent difference on every trade you take. That can easily be the difference between being successful and and and barely breaking even or even losing money, right? I Mean traders are trading tens of thousands of shares a week, hundreds of thousands of shares a month, millions of shares year. So when you multiply a million shares times five cents a share, that starts to really add up and they'll be able to start collecting that one cent per share in the form of the the rebate that they're getting back to them.

But if you're losing it in in the form of a poor execution, that's gonna be a problem. Now this is speculation because I don't know if they're gonna make any changes to the order routing. they might not. A couple of other traders that I know have already proactively reached out to Ameritrade and asked and said hey, what is this gonna mean for order execution They've said we don't know yet because you know this Commission war has just put them all these brokers in the position of just cutting costs and figuring it out later.

So I'm really curious what its gonna mean and I Love again for you guys to put in the comments below what you think it's gonna mean for your account: Are you gonna stay at a merit rate? if you're currently trading with a different broker? Are you now gonna switch to a merit rate? And you might also be wondering about the broker that I use? You can check out the link below to see which broker I'm using and whether or not I'm gonna switch. The reality is for me, in order to trade, the strategy that I trade I need a certain set of tools and I need to be able to route my orders to the market in a very specific way if I lose those abilities. if I lose those tools, essentially I'm losing my edge in the market and that can be the difference between being successful and losing money. So I don't have any plans right now to make Ameritrade Etrade or Interactive Brokers either of those brokers my primary broker now I could see maybe using one of them for a retirement account that I don't trade in as actively.

but I really think that I would lose more money due to poor order execution, inability to use the hotkeys that I like then I would save in commissions and that's it's all about. You know, cost-benefit analysis and for me, the benefit I'm not clear that it's there until I Find out a little bit more about the routing and in any case, I've never been a big fan of T V-- Ameritrade simply because the order execution when I was there was always a little bit slower and I wasn't able to utilize the direct access routing that I like and I wasn't able to set up the hotkeys that I like So merit rate has never been in my top I Recommended brokers, but again, really interested to hear what you guys think about this change. it's it's a pretty big deal and ultimately I Really hope that this Commission war will just be good for traders, but it could mean that brokers start to really neglect active traders like us because we're going to be the ones that are kind of making the most of the free Commission and they may not actually want to attract traders like us anymore. I Don't know, We'll have to wait and find out I Hope you guys have enjoyed this video in the description I've got links below so you guys can check out the videos on Interactive Brokers Charles Schwab and Etrade, and as always questions comments, leave them below and I'll see you guys back at it for my next video.

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