Charles Schwab will spend $ 26 billion to buy TD Ameritrade

Judy Rubio

Major discount broker Charles Schwab announced the acquisition of rival TD Ameritrade through an exchange of shares. The purchase is estimated at $ 26 billion. The premium to the company's securities is at the level of 17% to the weighted average value of the securities for 30 days. The company's Board of Directors made a positive decision on the transaction.

Joining forces with Charles Schwab and TD Ameritrade

In their statements, brokers say: "Such transactions form significant strategic advantages for the merging businesses and allow owners to get a good return. This will further improve trading and investment practices for each company's clients." After the merger, organizations will have a total of 24 million customer accounts and more than $ 5 trillion in user assets, with a pre-tax profit of $ 8 billion., and total revenue will reach $ 17 billion.

The development of the companies was almost identical. Each of the online brokers has been working on the market for 40 years. they competed with classic companies, significantly reducing the costs of trading shares and investing. This allowed us to attract a huge number of private clients.

In recent years, Carles Schwab and TD Ameritrade have experienced difficulties competing with other fintech corporations, allowing to make transactions with exchange of assets with the help of mobile applications and allowing to trade without a fee. In mid-autumn, they become the first company to report using a 0% commission on securities and exchange-traded funds on trading platforms in Canada and the United States. As a result, the value of US brokers' shares fell sharply, resulting in their capitalization falling by $ 13 trillion. in a day.

TD Ameritrade securities lost 26% of their value, the largest collapse since 1999. The company's revenue from trading is a quarter of its revenue, while Charles Schwab's is only 7%. The announcement resulted in a 9.7% drop in the company's share price.

Overcome the crisis

TD Ameritrade has announced plans to take action to remain competitive, and over time, it has also reset the commission. Interactive Brokers took a similar step. Charles Schwab went even further – just 3 weeks later, the company announced plans to launch trading not in whole shares, but in parts of securities. Thus, the online broker expects to attract young clients with limited financial capabilities. Charles Schwab, who is the founder of the organization, reported on the development of new programs. He didn't give details.

Making a deal can strengthen companies and increase pressure on large brokerage organizations that have rich clients. Among them are Morgan Stanley, Bank of America and UBS. They were already losing to their online competitors. In addition, Charles Schwab will attract additional attention from regulators. So, KWB expert Kyle Voigt said, "I believe that this deal will lead to serious barriers. They will depend on the assessment of the relevant regulatory authorities in the market."

After the news, shares of Charles Schwab rose 1% and TD Ameritrade rose 2.4%.

TD Ameritrade intends to offer customers delivery futures for bitcoin, bitcoin cash, Ethereum and Litecoin

A large US brokerage company, TD Ameritrade, invested an unnamed amount in The ErisX derivatives trading platform, so that the crypto exchange was able to offer its clients futures for the supply of Bitcoin, Ethereum, Litecoin and Bitcoin Cash. The article "What is altcoin?" will help a lot to learn about crypto-currencies different from bitcoin.

TD Ameritrade reported that its clients have access to the Bitcoin futures on the CBOE platform. Cooperation with ErisX, which acts as a clearing organization, will allow clients of the online broker to conduct trading with Litecoin, Ethereum and other popular cryptocurrencies.

James McKenzie, who serves as managing Director of TD Ameritrade, said, "As a result, users will have access to cryptocurrency products for the spot and futures markets."

The regulated trading platform ErisX intends to launch spot cryptocurrency trading in the first half of next year. In the near future will be able to trade futures with the delivery of the underlying asset.

Company Fidelity Digital Assets plans to issue a license of a trust in new York

The cryptocurrency Department of Fidelity Investments has sent an application for a license to NYDFS. If the document is received, the company will be able to provide custodial services in New York. Today, Gemini, Coinbase and Paxos have already issued a similar license.

The Bakkt crypto exchange from Intercontinental Exchange also aims to launch a custodial service for institutional clients. To do this, the platform sent an application for registration of the corresponding license to NYDFS.

The trust license opens up more options compared to BitLicense. For example, it allows you to provide more financial services, including consulting. NYDFS usually takes about 6 months to study the application and make a decision.

The collaboration of Charles Schwab and TD Ameritrade will allow companies to strengthen their positions in the market and increase their financial performance. Therefore, the purchase of their stock looks very promising. If you are looking for an asset to invest in, be sure to look at these securities. They have already shown growth, and in the future they have good prospects for rate appreciation.