The mating rituals of discount brokers aren't exactly rare sights. Taking the trade of trading to heart, they always seem to be out on shopping sprees. Ameritrade (NASDAQ:AMTD) scooped up Datek and National Discount Brokers. E*Trade (NYSE:ET) has been all over the financial services map in acquiring companies such as Telebank, LoansDirect.com, and Web Street. On the species chart, you can lump these critters between rabbits and guppies.
And, yes, E*Trade is at it again. The online financial specialist has confirmed that it is in talks to merge with Toronto Dominion's (NYSE:TD) TD Waterhouse brokerage. The combined company would only fall short of Charles Schwab (NYSE:SCH) in terms of discount brokerage size.
We'll expect a wedding invitation, of course. TD Waterhouse has been a member of our active Broker Center for years. However, as far as shareholders are concerned, consolidation can be a beautiful thing. It's not just the raw combination of accounts, or even the cost-saving efficiencies that arise through economies of scale and the reduction of overlapping redundancies, that is exciting about the nuptials -- not that there's anything wrong with those things.
In the highly competitive discount brokerage landscape, consolidation translates into one less competitor for E*Trade to worry about if it does in fact team up with TD Waterhouse later this year. That does not mean that fees will inch higher. However, with trading volume returning after last year's inviting stock gains, the discount brokers are well positioned to grow their financials anyway.
Shares of E*Trade have nearly quadrupled since last year's lows. While investors may have a tough time deciding between buying into the discount brokers or just opening up new accounts, deciding on the merits of the merger from an investing perspective is pretty clear. In every sense, it's a fair trade.
Is finding a new broker part of your New Year's resolution? Have you checked out Broker Comparison Table lately? Who are the best discount brokers out there based on your particular needs as an investor? All this and more -- in the Discount Brokers discussion board. Only on Fool.com.
