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The move to eliminate trading commissions at three big U.S. brokerage firms last week represents a negative for the retail brokerage sector, says Moody’s Investors Service in a new report.

The rating agency said that the decision to drop trading commissions — led by Charles Schwab Corp., and quickly matched by TD Ameritrade Holding Corp. and E*TRADE Financial Corp. —  will negatively impact the brokers’ revenues and their profitability.

The last time the U.S. retail brokerage sector engaged in a price war, back in 2017, the rising interest rate environment helped cushion the revenue effects, Moody’s said.

This time around, however, “the current rate environment is more likely to increase revenue headwinds increasing the firms’ challenges,” it said.

This revenue squeeze will also negatively affect profits, Moody’s said.

“While a portion of this pressure will likely be offset by cost savings from tighter expense controls, we expect profitability will decline from the robust levels reported over the past 12 months,” it said.

Additionally, the drop in commission revenue reduces the brokers’ earnings diversification, and increases their reliance on net interest spread revenue, Moody’s said.

“The flatter the yield curve, the more challenging it will be for these firms to sustain their net interest income as investments mature and are reinvested at a lower rate and a tighter spread to short-term rates,” Moody’s added.

The effects of spread compression could be somewhat offset if clients boost their assets held as cash, Moody’s noted.

“Additional cash swept into deposits would generate additional net interest income for each firm, even at narrower spreads,” it said. “Recent market volatility and economic uncertainty has already contributed to a modest increase in client cash levels. However, further growth in client cash is not assured.”