Morgan Stanley Closes Acquisition of E*TRADE
morganstanley.com
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Both institutional [1] and retail [2] trading are is still profitable. Even for smaller shops. That said, the business has economies of scale. It thus becomes more profitable the larger one is.
[1] https://www.ft.com/content/d7ab03c2-0939-4665-aa72-a2b922da7...
[2] https://www.forbes.com/sites/jeffkauflin/2020/08/03/robinhoo...
By contrast today, if you use, say, Fidelity for other purposes like company stock plans, there's not a lot of reason to use Etrade for personal trading given that most trades are free on both platforms.
It was actually a super smooth process better than when I bought my last house with Chase. If they don’t do more mortgages they should, the experience was excellent.
I’m learning new things
> MS needs more assets if they want to start lending.
No they don't, they have nearly a trillion in assets. And if they wanted more assets, they would buy up local or regional banks.
Just like tech companies started buying other companies for their "IP", now the trend is towards data. Whether it is to train their algorithms, to package and sell or whatever.
They're selling the order flow [1]. Just like Robinhood. This isn't a data play in a tech-company acquisition sense.
All the discount brokers sell order flow. When I was an options trader over a decade ago, we bought Schwab flow.
Professional trading platforms like IB tend to be more execution oriented.
Also, having your order sold to Citadel doesn’t mean you’ll get a worse fill.. Citadel still has to respect NBBO prices for fills
Lots of orders fill better than NBBO in dark pools. That’s how Citadel et al make money. That said, the slippage doesn’t really matter for small cheque sizes—it’s too small to matter.
TL;DR: they primarily sell to Citadel and Virtu.
CS is offering free trades because IBKR offered free trades. There was a cascade effect in the industry last year wherein IBKR announced free trades, and within two months the entire industry also started offering free trades.
We'd need to figure out why IBKR made that change. If you read the announcements, it sounds like it was just so they could get more lending (margin trading), options, shorting, etc fees.
https://www.fool.com/investing/2019/10/01/interactive-broker...
I'm not sure if IBKR lite allows you to control order flow, so there might be some profit there too. I'd guess that's a major distinction between IBKR-pro and IBKR-lite.
Robinhood.
Not exactly - After the Toronto-Dominion bank (aka TD) had previously bought Waterhouse Securities and formed TD Waterhouse, it was Ameritrade that bought the US part of TD Waterhouse from TD and rebranded itself as TD Ameritrade. TD continues to own 40% of TD Ameritrade. After Charles Schwab closes their majority acquisition of TD Ameritrade, TD will continue to own about 13% of the company. But TD has never been a majority shareholder of anything with the word Ameritrade in its name.
TD continues to be a major institution in its own right in both Canada and the US, and has engaged in plenty of other consolidation outside the scope of what's currently TD Ameritrade. Not disagreeing with the general point.
[1] https://www.amazon.com/Invested-Changing-Forever-Americans-I...
Deal received the final approval last week[0] and is set to close early next week.
[0]: https://www.federalreserve.gov/newsevents/pressreleases/orde...
Even if Etrade is way behind the current generation of fintechs, it's way beyond what the big banks are capable of building inhouse.
For some, this accessibility is more of a liability than an asset (i.e. gambling addicts with full options access), but I agree that its generally been for the better.
The system is already structured to favor the wealthy by denying access, restricting it because of some problems only serves to help them.
Additionally, while the gambling house edge might be 1-7% in a casino, stocks are real assets (mostly) representing profitable companies (which on average increase in value over the long term).
Their product was to specify a basket of stocks with percentages, specify a dollar amount, and then purchase on some cadence. Dollar cost averaging made simple. Before the various discount trading houses went zero-commission, this was impossible to do cost effectively, since you'd lose more in commissions than you'd gain from dollar-cost-averaging + diversification benefit.
Now with zero commissions, it is still hard to do because the process is manual. As an example, suppose you want to purchase $1000/wk of {NVDA 23%, MSFT 27%, GOOG 10%, TSLA 40%}. It should be easy to do. It was with ShareBuilder. You buy less of the stock as it goes up, more as it goes down -- the ultimate buy low "sell" high.
M1 Finance is the only product I found which does the Dollar Cost Averaging well with your choice of stocks. There are other products (e.g., Betterment, but then they stick you with stock portfolios -- better in theory, ahem)
Assuming we have an active FTC soon wouldn’t this lead to calls for to “break up big brokerages”, like there are for banks in 2008 and tech companies today? I’d imagine financial services is fractured and diverse enough where it’s hard to say that only a few key players dominate the market.
https://www.morganstanley.com/press-releases/morgan-stanley-...