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Zecco to Limit Free Trades in 2008
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I just received an email from Zecco about a change to their fee structure, effective 01 Jan 2008, and below is a comparison of the changes as I can tell.
| Description | Current | Future (01/01/08) |
|---|---|---|
| Free Trades per Month | 40 | 10 |
| Min. Balance* | $0 | $2,500 |
| $ Per Trade | $3.50 | $4.50 |
*Minimum Balance: Under the new structure, you only get 10 free trades a month if you have a balance over $2,500. Those with balances under $2,500 will not get any free trades. So, while the account has no minimum balance, to qualify for ten free trades you must have more than $2,500 in that account.
Summary
This likely will have little effect on the majority of Zecco users as Zecco claims that 98% of their investors will not be affected, that is, 98% trade less than 10 times a month (good!). I bet you that they saw a large percentage of their costs being eaten up by day traders and so they decided to change the structure such that they can start charging those “power users” without upsetting the majority of their customers. This also allows them to add a number of features they’ve wanted to such as increasing the number of service representatives, adding 3 and 4 legged options strategies (butterflies, condors, etc.), releasing options analytics, and building up their ZeccoShare social network (all these were described in the email).
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As a correction, Zecco’s notification email states that their change in policy would not affect 98% of online investors, not 98% of their customers. Just by watching the forum activity on the Zecco site, it has become apparent that many current customers are affected and upset by the change.
I find the changes ridiculous, but business is business. If they are attempting to get rid of smaller (a.k.a. less profitable) customers, this will do the trick. I only wish that they had not tried to mask it with the spin of “improving customer experience.”
The $2,500, that’s total holdings in the account. Not free cash. Right?
Yes, that’s total holdings. This has been answered on zecco forums.
I think Zecco has made a terrible mistake with this decision. They have alienated the customers that made them what they are. Some have even accused them of deceptive and misleading advertising practices, after all the CEO himself assured everyone on his CNBC interview, that the business was sustainable while maintaining the free trade structure. Didn’t they say Zecco stood for “Zero cost commissions” or something? So far I’ve heard nothing but bad press on Zecco, I suppose we’ll see.
If you don’t like the new restricted policies let Zecco know, sign the petition: http://www.petitiononline.com/zecco/