What Schwab's TD Ameritrade Buyout Plan Means To Peers
Zacks Investment Research | Nov 21, 2019 08:39PM ET
Charles Schwab (NYSE:SCHW) is in advanced talks to take over its biggest competitor TD Ameritrade Holding (NASDAQ:AMTD) . The news was first reported by CNBC, citing persons familiar with the matter.
Besides, the Financial Times noted the deal value at approximately $25 billon. In case the talks succeed, it will lead to the creation of a financial behemoth with combined client assets worth more than $5 trillion.
Nonetheless, the deal will require regulatory approvals, with all major agencies — the Securities and Exchange Commission, the Financial Industry Regulatory Authority, the Federal Reserve, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation —likely to have a say.
Though the present finance sector regulations are not as stringent as they were but a deal as big as this is likely to face a fair share of regulatory and compliance issues. Further, as two of the biggest online brokers are involved, the transaction could face tough antitrust scrutiny.
Also, the expected merger is likely to hit the competitive position of the likes of E*Trade Financial (NASDAQ:ETFC) , Fidelity Investments and Interactive Brokers (NASDAQ:IBKR) . Thus, while the shares of Schwab and TD Ameritrade climbed 7.3% and 16.9%, respectively, following this news, E*Trade tanked 9.3% and Interactive Brokers was down nearly 1%. Meanwhile, Fidelity Investments is not a listed company.
Need for Consolidation
At the time when the online broker industry is going through massive disruptions, the deal seems to be a way forward. It was only last month that all major industry players had begun offering commission free trading, with Schwab leading from the front.
Notably, while Schwab expected 3-4% adverse impact on quarterly net revenues from the move, for TD Ameritrade (generating about 25% of revenues from trading), it was likely to result in a 15-16% decline in quarterly revenues. (Read more: Original post
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.