This is positioning them to increase prices. CS is tired of discount brokers like Ameritrade under-cutting them, so they're going to try and buy out a handful and see if they can pay for it with fee increases.
How long until Robinhood gets purchased? I'd be surprised if it wasn't consolidated this time next year.
I think you actually have things backwards. Charles Schwab cut their trading fees before Ameritrade did and this move to $0 trading fees affected CS less than Ameritrade because CS makes more money from other sources.
I think most brokerages make the bulk of their money on interest for margin trades and management fees. I read about Fidelity's new 0% ER funds (e.g. FZROX), and it's a loss leader for their larger margin business.
Schwab has a good business going with offering mutual funds and retirement accounts, but I don't think they have a solid margin business, but I think TD Ameritrade does, which is likely why they're making this acquisition.
I agree with this sentiment but I feel like the barrier for entry for another discount broker is rather low right? If RH gets bought I assume another startup will rise to fill that space now that the business model has been proven.
This must really hurt for E-Trade. They're getting boxed in on both sides now, with Robinhood beating them in the discount brokerage market and the soon to be Schwab/TD on the premium side.
Comments
This is positioning them to increase prices. CS is tired of discount brokers like Ameritrade under-cutting them, so they're going to try and buy out a handful and see if they can pay for it with fee increases.
How long until Robinhood gets purchased? I'd be surprised if it wasn't consolidated this time next year.
I think you actually have things backwards. Charles Schwab cut their trading fees before Ameritrade did and this move to $0 trading fees affected CS less than Ameritrade because CS makes more money from other sources.
An interesting article about it: https://www.bloomberg.com/opinion/articles/2019-11-21/schwab...
I think most brokerages make the bulk of their money on interest for margin trades and management fees. I read about Fidelity's new 0% ER funds (e.g. FZROX), and it's a loss leader for their larger margin business.
Schwab has a good business going with offering mutual funds and retirement accounts, but I don't think they have a solid margin business, but I think TD Ameritrade does, which is likely why they're making this acquisition.
I agree with this sentiment but I feel like the barrier for entry for another discount broker is rather low right? If RH gets bought I assume another startup will rise to fill that space now that the business model has been proven.
This must really hurt for E-Trade. They're getting boxed in on both sides now, with Robinhood beating them in the discount brokerage market and the soon to be Schwab/TD on the premium side.