The deal — if one happens — would come one month after both companies announced plans to eliminate commissions for most online trades — a move that is great for their customers but left analysts and investors in these stocks wondering how Schwab and TD Ameritrade would make up for the loss in revenue.
Schwab said it would go to zero just a few days after smaller rival Interactive Brokers Group (IBKR) said it was ending commissions. But the decision by Schwab launched an immediate price war, with TD Ameritrade (AMTD), E-Trade (ETFC), Fidelity, Ally Invest (ALLY) and other smaller online brokers all quickly following suit.
The traditional discount brokers have all faced intense competition from Robinhood, a trading app popular with millennials that launched a few years ago with a no commission business model.
Schwab (SCHW) and TD Ameritrade were not immediately available for comment.
Shares of Schwab surged almost 15% in early trading while TD Ameritrade’s stock shot up nearly 30%. Interactive Brokers Group’s stock rose about 2% but E-Trade’s shares were down more than 3%.