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E*Trade/TD Ameritrade?

Posted By Barry Ritholtz On August 22, 2007 @ 10:15 am In Corporate Management,Investing,M&A,Trading | Comments Disabled

ETD Trade: This morning’s WSJ [1] reports:

The online brokerage industry, which underwent a wave of consolidation after the bursting of the dot-com bubble, may be headed for another shakeout, with giants TD Ameritrade Holding Corp. and E*Trade Financial Corp. holding merger discussions.

A merger of the two online brokers would create a dominant player in what has been a highly fragmented industry, with dozens of smaller companies battling for market share. As a result, it could reduce some of the fierce competition that has benefited consumers by driving down the cost of online trading but has squeezed the industry by chipping away at its profit margins.

There is some question as to whether this will get through the FTC.

The bigger concern is that this is merely a temporary fix. Neither company has responded well to the change in individual investor behavior and character since the 2000 market crash.   

Management of both firms are strongly advised to read our 2005 white paper (excerpted here: On Line Trading: A Business Plan for the future [2]). It accurately foresaw the decreased trading volumes and increased competition in the online trading  space, and is even more relevant of a biz plan today than when it was written.

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Source:

TD Ameritrade In Merger Talks With E*Trade [1]
By SUSANNE CRAIG and DENNIS K. BERMAN
August 22, 2007; Page A1

http://online.wsj.com/article/SB118774911334904929.html


Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2007/08/etradetd-ameritrade/

URLs in this post:

[1] WSJ: http://online.wsj.com/article/SB118774911334904929.html

[2] On Line Trading: A Business Plan for the future: http://bigpicture.typepad.com/comments/2005/06/on_line_trading.html

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