Brokers Get Hitched

"You love her, but she loves him
And he loves somebody else, you just can't win."
-- "Love Stinks" by J. Geils Band

It's official! Ameritrade (Nasdaq: AMTD) is acquiring Toronto Dominion's (NYSE: TD) TD Waterhouse subsidiary in an all-stock deal that was valued at $2.9 billion when it was first announced yesterday.

The proposed pairing of the two popular discount brokers should finally put to rest the takeover speculation that began last month when E*Trade (NYSE: ET) made an unsolicited offer to buy Ameritrade before it could propose to TD Waterhouse.

Ameritrade gave E*Trade the kiss-off, even after E*Trade returned a few weeks later with a bigger dowry. So Ameritrade gets TD Waterhouse and E*Trade is kicked to the curb.

A year ago, I spoke to Ameritrade CEO Joe Moglia and happened to ask him about sector consolidation. "I think that there is still potentially more consolidation in the trade," he said at the time. "Discount brokers have gone from numbering in the hundreds to just 110 over the past few years. I think that number will continue to go down."

Moglia has done his part to make those words a reality. His company has been an active acquirer of smaller rivals like JB Oxford last year and Datek in 2002. Waterhouse is much bigger than that. While it's no Charles Schwab (NYSE: SCH), with 3.2 million active accounts it's an established giant in the brokerage realm.

Consolidation is important for the industry -- and it's not just the realized synergy savings. The sector has struggled lately with low trading volumes and cutthroat price wars. A merger won't get the public trading more often, but it will give the industry one less broker with an itchy commission-rate-slashing trigger finger.

For consumers' sake, let's hope that the consolidation doesn't continue until there is just one player standing. Our updated Broker Center, which compares participating sponsors, would feel awfully lonely if it was reduced to a single column.

And E*Trade, keep your chin up. There are other fish in the discount-brokerage sea. Just make sure that you get them before Ameritrade throws out another line.

Related Foolishness:

• Learn more about your trading options in our updated Broker Center.
• Read up on what Ameritrade's CEO had to say about broker consolidation last year.
• The saga between E*Trade and Ameritrade is, quite possibly, heartwarming.
• Talk shop in our Discount Brokers discussion board.

Longtime Fool contributor Rick Munarriz was a Waterhouse customer through most of the 1990s, but he's not for sale. He does not own shares in any of the companies mentioned in this story. The Fool has a disclosure policy. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.