| 10 March 2010

E*TRADE Financial (ETFC) announced today a new pricing promotion for active traders. Open a Power E*TRADE account with a minimum of $2,000 and you can trade free for 60 days. The offer is for new accounts only and caps out at 500 free trades.

The fine print indicates you will actually be charged for your trades but will then be credited for those trades within eight weeks. The first 149 stock or option trades will be charged, and then credited, at $9.99. From 150 to 500 trades you'll be charged and then credited at a $7.99 per trade rate (plus $0.75 per options contract).

The quick math on this offer shows us it has a potential value north of $4,000 in saved commissions, which is certainly no chicken feed. Of course this is only meaningful to traders to the extent that they actually trade that frequently. To execute 500 trades in a 60-day period you would have to average 10 trades each business day.

The promotion tops rival TD Ameritrade (AMTD), which currently offers 30 days of free trading, up to a maximum of 500 trades. Given 60 days to complete trading activity it's likely that new E*TRADE customers stand to benefit more. Another competitor, OptionsHouse, offers 100 commission-free trades to new accounts.

It's unclear whether this action will spur an "offer war" similar to the online broker price war we witnessed earlier this year. Charles Schwab (SCHW) and Fidelity both dropped commissions for online trades. Schwab cut its commissions to $8.95 per trade while rival Fidelity cut their commissions to $7.95.

The news is perhaps a mixed blessing to E*TRADE shareholders. According to company reports, the firm expects to take a $50 million hit to revenue thanks to its recent pricing decisions. E*TRADE dropped its commissions from $12.99 to $9.99 last month.