Etrade makes offer to buy Ameritrade

Discussion in 'Retail Brokers' started by birdman, May 9, 2005.

  1. birdman


    Marketwatch announced today that Etrade has made an unsolicited offer to buy Ameritrade.

    The article mentioned that Ameritrade may be trying to buy TD Waterhouse.

    The portion of the article I found most interesting was where they quoted the average daily # of trades at the following brokers for the first 3 months in 2005.

    I was surprised at who was ahead of who, here's what they showed.

    Fidelity 243974
    Schwab 191000
    Ameritrade 167000
    Scottrade 97000
    Etrade 88000

    Or you can see the entire article below:

    To print: Select File and Then Print in your browser pull-down menus. Back to story
    Electronic brokers consolidating
    Ameritrade talks may unleash wave of deals in sector
    By David Weidner, MarketWatch
    Last Update: 1:48 PM ET May 9, 2005

    NEW YORK (MarketWatch) -- Call it an e-merging industry.

    Speculation Monday that E-Trade (ET: news, chart, profile) had made an unsolicited offer for Ameritrade could just be the lynchpin for an explosion of mergers and other deals in the industry. See full story.

    Squeezed by lower trading volumes, so-called e-brokers have been engaged in a price war to gain market share and customers. That pressure may drive the remaining players to partner with competitors in deals that allow for drastic cost cuts.

    Other competitors already under pressure include Charles Schwab (SCH: news, chart, profile) and TD Waterhouse.

    "Falling prices will eventually lead to zero-profit online trades," analysts at Forrester Research said in a research note Monday.

    FMR Corp.'s Fidelity unit, which holds the No. 1 market-share position in the industry, is seen as the least likely become a seller. Fidelity could, however, become a buyer to build its presence and grab technology from its competitors.

    "The firm that figures out a non-price-cutting formula to differentiate themselves will be the long-term winner," said Barry Ritholtz, chief market strategist at Maxim Group.

    Of the stand-alone firms left, Ameritrade (AMTD: news, chart, profile) is seen as the most dependent on trade commissions. As pricing has come down, the firm has been squeezed, said Matthew Fischer, an analyst with IRG Research.

    Charles Schwab, by contrast, derives just 20% of its revenue from trading commissions. The San Francisco-based brokerage has been slashing prices to gain customers and push them into other fee-based products such as financial advice and wealth-management services.

    E-Trade offers banking products -- including a growing mortgage business -- making it better positioned for the coming consolidation phase.

    "That's why it's difficult" for Ameritrade, Fischer said. "The activity-based trading side is competitive."

    Ameritrade reported 167,000 average daily trades for the first three months of 2005, making it the third largest online broker behind Fidelity, with 243,974 average daily trades, and Schwab, with 191,000 average daily trades during the period.

    E-Trade registered 88,000 average trades per day. ScottTrade had 97,000.

    TD Waterhouse, a unit of Toronto-Dominion Bank (TD: news, chart, profile) does not report its trading volume publicly.

    Like Schwab, the brokerage supplements its online business with a branch network that offers other financial products. The Canadian bank was in talks to sell the unit in early 2004, but those talks broke off over price, according to reports.

    Analysts said TD Waterhouse may be a better fit with Schwab. But in an interview with MarketWatch in March, TD Chief Executive Edmund Clark said the unit's wealth-management and advisory businesses had offset price increases. "We managed to keep our revenues the same," he said.

    David Weidner covers Wall Street for MarketWatch.

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  2. Dying companies trying to artificially stay alive by mergers and acquisitions. And who says this economy is fine?

    Trading industry needs dumb money to keep going and dumb money is nowhere to be found. Pro traders cant keep these companies alive, they need someone to take money from.
  3. Catoosa


    This current market reminds me of the market following the bubble burst of 1973/74. A whole new generation of young unknowing people will have to grow up to provide the uninformed dumb money. This could be a long wait.:confused: