TD Ameritrade consumed Scottrade and now Charles Schwab is in the process of consuming TD Ameritrade. It seems that consolidation of online trading platforms is accelerating.
The margin on trading is quickly becoming negative so banks think they can absorb them and profit on flow and potentially the asset base. MS needs more assets if they want to start lending.
Both institutional [1] and retail [2] trading are is still profitable. Even for smaller shops. That said, the business has economies of scale. It thus becomes more profitable the larger one is.
It's also worth remembering that some of these outfits--certainly including Etrade--became popular largely because they were offering $7 or so trades at a time when the traditional brokers might have been charging more than $50.
By contrast today, if you use, say, Fidelity for other purposes like company stock plans, there's not a lot of reason to use Etrade for personal trading given that most trades are free on both platforms.
MS isn’t a significant lender really so I don’t see that happening (they don’t get deposits like a Citi or JPM). Not sure how they could make that switch. That’s a huge cultural change no?
Now, they do do some relationship lending in small amount to investment banking clients off their own balance sheet... that is small relatively speaking though.
I just got a mortgage from them, and they do have their Cash Plus banking product.
It was actually a super smooth process better than when I bought my last house with Chase. If they don’t do more mortgages they should, the experience was excellent.
Nope. They want more data - especially trading data. It's why charles schwab is offering free trades. Apparently they believe the data generated is more valuable than charging $4 per trade.
> MS needs more assets if they want to start lending.
No they don't, they have nearly a trillion in assets. And if they wanted more assets, they would buy up local or regional banks.
Just like tech companies started buying other companies for their "IP", now the trend is towards data. Whether it is to train their algorithms, to package and sell or whatever.
I'd be very surprised if Schwab started selling order flow. One reason why the old guys prefer Schwab/TD to robinhood (and paid the commission) was because of more consistent fills because Schwab wasn't selling order flow
> having your order sold to Citadel doesn’t mean you’ll get a worse fill.. Citadel still has to respect NBBO prices for fills
Lots of orders fill better than NBBO in dark pools. That’s how Citadel et al make money. That said, the slippage doesn’t really matter for small cheque sizes—it’s too small to matter.
Even with Schwab, I get tons of fills less than NBBO. Maybe not as much or as good as IB, but you're still getting price improvements a lot of the time.
CS is offering free trades because IBKR offered free trades.
There was a cascade effect in the industry last year wherein IBKR announced free trades, and within two months the entire industry also started offering free trades.
We'd need to figure out why IBKR made that change. If you read the announcements, it sounds like it was just so they could get more lending (margin trading), options, shorting, etc fees.
I'm not sure if IBKR lite allows you to control order flow, so there might be some profit there too. I'd guess that's a major distinction between IBKR-pro and IBKR-lite.
Some. Since trader can have multiple accounts. So, some in IBKR, some in ToS and some in RH. It's not binary. Maybe you put all your meme stock gambling in RH for example
Charles Schwab started offering free trades because their competitors all started offering free trades. There was a "fee war" a year or two ago where each brokerage lowered their fees in response to others lowering theirs.
Just FYI, TD Ameritrade was comprised of Toronto Dominion Bank, which previously swallowed up Waterhouse Securities, buying Ameritrade. So consolidation has been going on for a while.
>TD Ameritrade was comprised of Toronto Dominion Bank
Not exactly - After the Toronto-Dominion bank (aka TD) had previously bought Waterhouse Securities and formed TD Waterhouse, it was Ameritrade that bought the US part of TD Waterhouse from TD and rebranded itself as TD Ameritrade. TD continues to own 40% of TD Ameritrade. After Charles Schwab closes their majority acquisition of TD Ameritrade, TD will continue to own about 13% of the company. But TD has never been a majority shareholder of anything with the word Ameritrade in its name.
TD continues to be a major institution in its own right in both Canada and the US, and has engaged in plenty of other consolidation outside the scope of what's currently TD Ameritrade. Not disagreeing with the general point.
Having dealt with both TDAmeritrade and Charles Schwab, I'd say that's probably a good thing. Neither were great, but Schwab was a much better user experience than TDAmeritrade in my opinion.
While I've had no issues with Schwab, I wonder what they're doing/did that made them the leading discount broker and not get gobbled up by someone. Of course, I'm sure they're also kicking themselves for not getting the Millennial/Gen-Z customers that Robinhood has.
They did sell to Bank of America in the 80s, then the founder bought the company back after a few years. I recently read Charles Schwab's book and would recommend it if you are interested [1].
I've used both. I love ToS and the two times I've had to get support ToS was great - like the first CSR could repro my bug and filed a ticket - and it's since been fixed.
A large part of this is that the move to zero-fee trades meant there's less money to maintain current operations, so by acquiring, they can, yes, "buy revenue," and save money by reducing redundancies and economies of scale. A world with zero-fee trades can only support so many brokerages.
In the past volume was king. A brokerage made money on volume. Nowadays, while volume is still important because of payment for order flow, investing the float has become a lot more important and represents a large portion of brokerage revenue.
This is entirely thanks to Robinhood. Like the company or not, they've done a great deal to shake things up. In my opinion, it's generally been for the better, and especially so for the average person.
More likely this is due to synergies Morgan Stanley expect, such as being able to cross-sell their other products to Etrade customers, and being able to convert their current customers to Etrade.
Even if Etrade is way behind the current generation of fintechs, it's way beyond what the big banks are capable of building inhouse.
I am ambivalent on the company (I've recently switched to another), but I have seen nothing else get my friends and family this obsessed with investing and finance.
For some, this accessibility is more of a liability than an asset (i.e. gambling addicts with full options access), but I agree that its generally been for the better.
Options can indeed be like gambling, but that doesn't mean we should restrict it. It'll just serve to screw over the non-rich just as the "distinguished investor" rules do.
The system is already structured to favor the wealthy by denying access, restricting it because of some problems only serves to help them.
Additionally, while the gambling house edge might be 1-7% in a casino, stocks are real assets (mostly) representing profitable companies (which on average increase in value over the long term).
Losing ShareBuilder was a heartbreak. There was no product as good, IMHO. The HN community suggested M1 Finance, though, which has been a pretty close alternative.
I've had really good interactions with ETrade phone support (working with them on employee stock plan related requests). It has been absolutely refreshingly good customer service -- they know their product so well and know exactly how to offer advice about how to use it.
I agree on ETrade, but the ShareBuilder product itsself was sunset after the merger with Capital One.
Their product was to specify a basket of stocks with percentages, specify a dollar amount, and then purchase on some cadence. Dollar cost averaging made simple. Before the various discount trading houses went zero-commission, this was impossible to do cost effectively, since you'd lose more in commissions than you'd gain from dollar-cost-averaging + diversification benefit.
Now with zero commissions, it is still hard to do because the process is manual. As an example, suppose you want to purchase $1000/wk of {NVDA 23%, MSFT 27%, GOOG 10%, TSLA 40%}. It should be easy to do. It was with ShareBuilder. You buy less of the stock as it goes up, more as it goes down -- the ultimate buy low "sell" high.
M1 Finance is the only product I found which does the Dollar Cost Averaging well with your choice of stocks. There are other products (e.g., Betterment, but then they stick you with stock portfolios -- better in theory, ahem)
I ended up in E*Trade after they bought OptionsHouse. Thankfully nothing changed for me but the logo. The app I use is better than the other brokers I've tried (not many), but the margin rates are garbage compared to IBKR so I don't use them for after-tax investment.
I just moved my portfolio from Robinhood to E*TRADE because RH had a scary long-standing bug around calculations after stock splits. I also have a Shareworks account which also was just purchased by Morgan Stanley. Do you think this acquisition will make the products (and how they work with each other) better, or should I head back to Robinhood?
I can’t help but think that eventually we’ll hit the “Big X” of brokerages if this consolidation continues, alongside the acquisition (mergers?) of TD Ameritrade and Charles Schwab.
Assuming we have an active FTC soon wouldn’t this lead to calls for to “break up big brokerages”, like there are for banks in 2008 and tech companies today? I’d imagine financial services is fractured and diverse enough where it’s hard to say that only a few key players dominate the market.
I think an interesting element to this is that a lot of the things a monopolist would do in the brokerage market are already highly regulated and considered market manipulation or breach of fiduciary responsibility (although that's been relaxed recently) so maybe there isn't the same natural tendency to monopoly.
I used to have a Morgan Stanley account. Then Morgan Stanley sold a division to Harrisdirect, and it became a Harrisdirect account. Then Harrisdirect was bought by Etrade and it became an Etrade account. Now apparently I have a Morgan Stanley account again.
for arbitraging currently you're getting a 1.58% profit at current ETFC an MS closing prices. it's a funky graph : % profit = ((1.0432 * MS) - ETFC) / ETFC
As automation increases, we move increasingly from variable per-customer costs to fixed one-time-investment-in-codebase costs. Consolidation should happen.
