Charles Schwab Looks to Purchase TD Ameritrade

A deal would create a brokerage shop with roughly $5 trillion in AUM

Charles Schwab and TD Ameritrade could merge, according to CNBC’s Becky Quick. News of a possible deal dropped on Thursday morning. As discount brokerages experience a massive disruption due to “Zero commission” trades, consolidation seemed likely. News of a possible deal sent shares of AMTD up nearly 25% in premarket hours. Schwab shares popped more than 8%.

How a Charles Schwab – TD Ameritrade Merger Would Work

The wealth management industry would immediately see a massive power player emerge from such a deal. Charles Schwab has about $3.8 trillion in assets under management. TD Ameritrade controls about $1.3 trillion.

For several years, companies like Schwab and TD Ameritrade engaged in a major price war over trading commissions. Firms were slashing trading costs from what had become a standard of $9.95 or $7.95 per trade lower and lower. Finally, in October, Schwab decided to eliminate its online trading commissions altogether. Rivals followed suit.

Pundits initially blamed the cuts on Fintech disruptors like Robinhood; however, such cuts appeared to be the natural progression of the industry over the last 30 years. And, instead of fretting over Schwab’s bottom line, the question for many is what Robinhood and these trading apps will do to survive. Brokers like Schwab have a distinct advantage in other areas like ETFs, brokerage services, and research.

That said, consolidation was likely in the discount brokerage space. In fact, Charles Schwab’s Chairman and Founder Bob Pisani told CNBC in October that mergers were a “logical conclusion that will occur.”

Finally, according to CNBC, Schwab CEO Walter Bettinger would oversee the combined company. TD Ameritrade’s CEO and President Tim Hockey announced during the summer that he is departing the firm in Q1 2020.

Related: TradeStation Announces TSgo and Commission-Free Trading

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