Why would a firm buy a discount brokerage firm especially since a proposed transaction tax would kill the business model?
You can’t be serious. Should the whole trading industry start shutting down and not do business as usual, because there are some proposals on the table every day since the trading existed?? And if the government taxes the trading industry out of existence then how the tax can even exist and be a threat, since there will be no one to tax? The tax would be $0 on $0 in trading transactions, right? And, should Amazon stop acquiring companies because there are plenty of more realistic proposals to dismantle Amazon and separate it from its various tentacles?
Lot's of other profit centers in the business - tax might actually drive some consolidation. If the 10 year ever get's back to 4% you'll see more and free platforms.
Trading costs have trended way down over the years. It used to cost over $100 for the typical trade, one-way that is & a decent platform run over broadband about $6,000 per month. Traders are wise to only focus on what within their control.
The fact the transaction tax will never raise much money has nothing to do with the likely reality that a government run by Democrats will put one in place, Explain how pure discount firms will adjust.
You evolve or die. When trading revenue falls one alternative is to attempt to bring in more assets, more margin debt and more fee-based business overall - like creating your own ETF's. If you look at the attached you see interest revenue is 10X trading revenue. That is a fairly common thread if you are Schwab, TD, E-Trade. If you survive off of trading revenue you'll need to evolve - especially if rates actually ever go up. Every time there is a regulatory or tax change some evolution occurs and as is the case in all evolution there are some losers.
Everything is electronic now. If the unspeakable were to happen and some huge transaction tax were enacted in the USA, all the market makers would take it into account, and there would be much wider bid/ask spreads on all securities listed on US exchanges. I could envision it spurring a lot of new exchanges and market markers to do business in other countries where the regulations would be more favorable. It would hit US brokers pretty hard, as I would assume a lot of retail traders would decide to... trade less
Using the word huge shows that even you don't comprehend the consequence. A tax of .001 which bernie sanders proposes would put nearly every day trader out of business. It's consequence to US based brokers are clearly underestimated.