Charles Schwab Corp. (The) (NYSE:SCHW)
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Online brokerage firms TradeKing Group and Zecco Holdings announced their merger on Tuesday, a tie-up meant to lure trades from larger rivals.
The deal would consolidate a client base of around 500,000 accounts and place it sixth behind industry leaders. The financial terms of the deal were not disclosed.
"It's all about creating a firm with the resources to challenge the top five," Don Montanaro, chief executive of TradeKing, told Dow Jones Newswires, referring to Charles Schwab Corp. (SCHW), TD Ameritrade Holding Corp. (AMTD), E*TRADE Corp. (ETFC), Fidelity Investments and Scottrade Inc.
Charles Schwab held roughly 8.7 million funded client accounts at the end of March, according to Evercore Partners. TD Ameritrade had around 5.7 million, and E*TRADE about 3.9 million. Smaller rivals like Interactive Brokers Group Inc. (IBKR) had about 200,000 client accounts.
Fort Lauderdale, Fla.-based TradeKing is concentrated on equity-options trading, while San Francisco-based Zecco offers foreign exchange-trading in addition to stocks and options. TradeKing clients would gain access to Zecco's foreign-exchange trading capabilities.
"In the end, the merger will give them more scale, but they'll still be much smaller than the E*TRADEs and Ameritrades of the world," said Richard Repetto, brokerage analyst with Sandler O'Neill. "I just don't think they have the same marketing budget."
Both brokers have made the integration of client interaction an integral part of their trading platforms since launching in 2005. Capabilities for traders to communicate with each other, as well as with the firms' analysts, on forums are built into both platforms. Separately, TradeKing clients can open and manage accounts through Facebook.
The deal, if approved by regulators, would create a large, integrated financial social network, said Michael Raneri, chief executive officer of Zecco.
While its social-network capabilities are intriguing, it's also too early to tell how widely retail investors will adopt the newly merged exchanges on social-media sites, said Chris Allen, retail brokerage analyst with Evercore Partners.
The deal marks the latest in an ongoing consolidation push among discount brokerage firms, much of which has focused on adding heft in derivatives trading. Schwab last year acquired Chicago-based OptionsXpress Holdings for about $1 billion, following on TD Ameritrade's 2009 acquisition of derivatives-focused brokerage Thinkorswim. Last year, Tokyo-based online securities brokerage Monex Group bought another smaller U.S. player, Tradestation.
-By Chris Dieterich and Alexandra Scaggs, Dow Jones Newswires; 212-416-2611; email@example.com;