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JPMorgan undercuts discount brokerages on trades

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NEWYORK (Reuters) – JPMorgan Chase & Co, <JPM.N> in a bid to lure customers from the discount brokerage industry, said on Tuesday it will begin offering free stock trades for self-managed accounts through its Chase mobile banking app starting next week.

Shares of Charles Schwab Corp. <SCHW.N> and other discount brokerages fell after CNBC reported the offering was imminent.

The service will be part of a new suite of investment products called “You Invest” through which customers will get at least 100 free trades of stocks and exchange-traded funds in their first year, a bank spokeswoman said on Tuesday.

As part of the You Invest offering the bank also plans to launch online managed portfolios early next year, the spokeswoman said.

The industry had been anticipating some sort of dramatic move by JPMorgan for several years. In April 2017 Chief Executive Officer Jamie Dimon said in his annual letter that an “inexpensive” self-directed online tool was coming by the end of that year. He also has talked adding free services as part of a bigger consumer package, much like he has seen do with its Prime service.

Still, the amount of price-cutting, coupled with the bank’s widely-used app, makes the move by the biggest U.S. bank potentially disruptive to the discount brokerage industry pioneered by Charles Schwab Corp. <SCHW.N>

“While this has been telegraphed for some time, JPM entering the discount brokerage market is not your typical bank given its size, scale and global brand,” equity analysts at Jefferies said in a note on Tuesday.

Shares of Schwab were down 2.35 percent to $50.21 Tuesday afternoon, while shares of TD Ameritrade Holding Corp <AMTD.O> were down 7.53 percent to $55.62. E*Trade Financial Corp’s <ETFC.O> stock was down more than 4.25 percent to $58.63.

The move follows other disruptive actions by JPMorgan in what analysts have called a “scorched earth” strategy against competitors to take market share in profitable business across banking and finance—from credit cards to commercial lending to securities custody.

The new investment services are being offered to so-called “mass affluent” customers with no minimum initial investment size, as well as to wealthier clients.

After one year of free trades, the bank expects to add some charges, with pricing depending on the type of account.

In comparison, Schwab currently charges $4.95 on stock trades while TD Ameritrade charges $6.95 per trade.

JPMorgan’s new service will also compete with startups like Robinhood, an online brokerage which offers commission-free U.S. stocks and ETFs trading.

(Reporting by Anna Irrera and David Henry in New York; Editing by David Gregorio)

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