Note from the Publisher: We were not able to report on this story yesterday, but we have previously had the pleasure of working with folks at both TD Ameritrade and Scottrade. Yesterday, it was announced that Omaha-based TDA would buy St. Louis-based Scottrade for $2.7B. Since these two brokerages are in the top 5 nationally, there is expected to be some antitrust scrutiny on the deal. What we found interesting is that Scottrade last year penned an agreement with Interactive Brokers to offer a white label options trading solution (which had previously been handled by OptionsHouse), and since TDA has that capability internally, that agreement may now go by the wayside, assuming they will put the two firms together with the intent to streamline operations and cut costs. This happens amidst other recent industry acquisitions including last year’s E-Trade/OptionsHouse deal and the Ally Financial/TradeKing deal. So there’s a lot of things going on in this sector right now. Keep your friends close, keep your enemies (competitors) closer.
“TD Ameritrade has agreed to buy Scottrade for $2.7 billion in a deal that would bring together two of the biggest U.S. discount brokerages, but is expected to face scrutiny from regulators.
It is the latest in a wave of consolidation in an industry which has been grappling with intense competition and weak trading volumes as a result of small investors being drawn towards cheaper investment products that track major indexes.
E*Trade Financial Corp,another discount broker, said in July that it would buy online brokerage OptionsHouse for $725 million, while Ally Financial Inc purchased TradeKing Group for about $275 million a month earlier.
In a connected deal, Toronto-Dominion Bank, TD Ameritrade’s biggest shareholder, said on Monday it had agreed to buy Scottrade’s banking business for $1.3 billion as it continues to ramp up its expansion in the United States.
TD Ameritrade’s acquisition of Scottrade combines two of the United States’ “big five brokerages”, the others being Charles Schwab, Fidelity Investments and E-Trade, and would leave only four major brokers operating in the marketplace.”