TD Ameritrade to buy Scottrade in two-step deal with TD Bank

Toronto-Dominion Bank and TD Ameritrade are buying Scottrade Financial Services for $4 billion in a deal that will combine two of the biggest US discount brokerages, the companies said on Monday.

TD Ameritrade, the largest US discount brokerage by trade executions, said it would pay $2.7 billion for Scottrade’s brokerage business. Toronto-Dominion Bank, TD’s largest shareholder, is acquiring Scottrade Bank for $1.3 billion in a deal that will expand its US operations.

The purchase of Scottrade by TD Ameritrade, which is subject to approval by US regulators, will produce a combined business with around 10 million client accounts and $1 trillion in assets, which will execute around 600,000 trades per day.

It is the latest in a wave of consolidation among discount brokerages, which are facing weak trading volumes and slow revenue growth as wealth managers cut fees amid intense competition. E*Trade Financial Corp, another discount broker, said in July that it would buy online brokerage OptionsHouse for $725 million while Ally Financial Inc purchased TradeKing Group for about $275 million a month earlier.

TD Ameritrade CEO Tim Hockey said the deal will leave the combined business wellplaced to compete and respond if a price war over commissions accelerates. “We certainly believe the regulators will look fairly at this deal and will opine,” he said in an interview. “I still think this is a considerably competitive marketplace, that’s for sure. There are lots of opportunities for additional competitors to get into our space and continue to drive price competition.” (RTRS)