Schwab Enters ETF Fray
November 4, 2009

SAN DIEGO (ETFguide.com) – After many months of behind the scenes planning, discount brokerage firm Charles Schwab has officially entered the ETF business.

The San Francisco, CA-based company introduced four index ETFs.

The Schwab U.S. Broad Market ETF (NYSEArca: SCHB), the Schwab U.S. Large Cap ETF (NYSEArca: SCHX) and the Schwab U.S. Small Cap ETF (NYSEArca: SCHA) are linked to Dow Jones indexes following U.S. stocks. The Schwab International Equity ETF (NYSEArca: SCHF) tracks the FTSE Developed ex-US index, which contains around 1,400 foreign stocks. The fund’s will charge annual expense ratios between 0.08% and 0.15%.

ETFs are low cost index funds that trade like stocks.

The $700 billion ETF industry in the U.S. is currently dominated by Barclays Global Investors (iShares), State Street Global Advisors (SPDRs) and the Vanguard Group.

In a statement, Schwab’s Chief Executive Walter Bettinger indicated that other ETF products would be forthcoming soon.

The firm also stated it would allow online commission free trading for its customers that buy and sell Schwab ETFs. This aggressive move has the potential to help Schwab’s ETFs to gain traction in a business noted for its hypercompetitive nature and rock bottom fees.  

Schwab is the largest discount brokerage in the U.S. The company already handles around 20% of all ETF trading by small investors. It also has a large and influential base of independent investment advisors.