stories filed under: "brokerages"
Wed, Aug 22nd 2007 3:08pm
It's being reported today that two companies closely associated with the last stock market bubble, TD-Ameritrade and E-Trade, are in talks to merge. Both companies have evolved to become comfortably profitable established firms, but throughout their history they have been dogged by steep price competition and high customer acquisition costs (as evidenced by the constant stream of TV advertising from both firms). Furthermore, active management of individual stock portfolios has never again reached the heights experienced during the bubble, as investors have turned to things like ETFs and other index funds, which don't lead to as many commissions. A merger could help both sides reduce costs, although there's still a lot of competition in this space, which would make it hard for them to raise prices too much. That being said, Dealbook points to some reasons to doubt the significance of these rumors. The two sides have said in the past that they'd be interested in exploring a combination, but there's nothing new now to suggest a deal is imminent. Furthermore, any deal would be beset by organizational challenges, as TD-Ameritrade is a unit of the larger Toronto-Dominion Bank, meaning E-Trade management would have to step out of the way. So, most likely, the two sides are likely to remain separate, and you can expect a continued flood of annoying brokerage ads (until the next time the market nosedives, that is).