Shares of Charles Schwab jump after sources say DOJ approves deal for TD Ameritrade

Investing News

Online broker Charles Schwab received antitrust approval from the U.S. Department of Justice for its acquisition of TD Ameritrade, sources told CNBC’s David Faber on Thursday.

Shares of Schwab jumped nearly 7% in premarket trading following the report. TD Ameritrade rose more than 9% before the opening bell. 

Schwab announced last November it would buy rival broker TD Ameritrade in an all-stock deal valued at $26 billion.  The merging of the two biggest publicly traded discount brokers will create a mammoth with more than $5 trillion in client assets, $3.8 trillion from Schwab and $1.3 trillion from TD Ameritrade.

The acquisition calls for 1.0837 Schwab shares for each shares of TD Ameritrade, sources said. 

There were concerns about Schwab’s dominance in the registered investment advisors space, added with TD Ameritrade share of the market; however, the DOJ did not see any violation, sources told Faber. The new company will hold over a third of the RIA custody market, JMP Securities estimates.

While some Wall Street analysts are worried the consolidation of two of the biggest players could flag antitrust issues, the company will only capture about 11% of client assets in the retail financial services market, Schwab said at the time the deal was announced.

The news was first reported in a tweet from Faber Thursday morning. 

Consolidation in the brokerage industry was expected given the massive amount of disruption that has taken place, with all the major brokers dropping commission fees at the end of last year. Schwab was the first of the major players to make the move, eliminating commissions last October

The major online brokers saw new accounts soar in the first quarter, when stocks experienced the fastest bear market and the worst first quarter in history.

Charles Schwab CEO Walt Bettinger said in an earnings release the broker saw “monumental volumes” of trading from the 609,000 new broker accounts added in the first quarter, with over 280,000 in March alone. TD Ameritrade said last month that retail clients opened a record 608,000 new funded accounts in the first quarter, with more than two-thirds of those opened in March.

The broker industry’s next approval will be Morgan Stanley accusation of E-trade, which isn’t expected to flag any antitrust issues, analysts tell CNBC. 

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