Charles Schwab agrees to buy TD Ameritrade for $26bn

THE PRICE war was swift and brutal, lasting less than eight weeks. On October 1st Charles Schwab said it would no longer charge retail customers for trading shares, exchange-traded funds or options online, forgoing $4.95 a trade. The share price of America’s biggest discount broker dropped by nearly a tenth. That of its big rival, TD Ameritrade, suffered more, plunging by a quarter (see chart). TD Ameritrade followed in eliminating commissions two days later. It had little choice, though it reckoned the move would cut its revenue by $220m-240m a quarter, or 15-16%.

On November 25th came a truce, and surrender: Schwab agreed to buy TD Ameritrade for $26bn in shares. The deal combines Schwab’s 12.1m brokerage accounts with TD Ameritrade’s 12m. It will unite two platforms used by independent financial advisers—7,500 on Schwab’s, 7,000 on TD Ameritrade’s—for trading, market information and regulatory updates.

Investors in both companies will be relieved. On...

via The Economist: Finance and economics Business Feeds

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