A deal between Charles Schwab and TD Ameritrade could create a behemoth with $5 trillion in combined assets and consolidate the industry that has been going through massive disruption.
There are rumors that the bank and stock brokerage company The Charles Schwab Corp. is negotiating a purchase of online broker TD Ameritrade. The two companies are the largest publicly-traded discount brokers in the United States but it is interesting to see what would this merger mean for the cryptocurrency trading.
But, let’s start from the beginning. Nebraskan TD Ameritrade has been crypto-friendly for a longer time now – meaning, its clients had the possibility to trade Bitcoin futures contracts on the Chicago Mercantile Exchange (CME) since 2018.
And, let’s not forget that the company also has its stake in ErisX, a Bitcoin spot and futures exchange with whom users can trade Litecoin and Ethereum futures as well. A few months ago the brokerage’s executive vice president Steven Quirk already commented that there is a pretty high demand for digital assets among retail investors.
He then said:
“We get calls, emails, 60,000 clients have traded something in this complex.”
Schwab, on the other hand, is pretty much more traditional when it comes to trading. Crypto wasn’t really its point of view when it comes to business. However, this San Franciscan company did enable its users that had futures account to trade Cboe Bitcoin Futures (XBT) through the StreetSmart Central or StreetSmart Mobile trading platforms as far back as April 2018. However, since then Cboe decided to discontinue this service. Still, Schwab’s board of directors isn’t so narrow-minded as people would think.
One of the board members, Chris Dodds is also a member of a board of directors of crypto exchange Coinbase. Be it as it may, Schwab seems to be quite satisfied with the traditional trading, as a matter of a fact, in September the company said that it had no plans to offer crypto trading and added that “investors should view these currencies as a purely speculative instrument”.
Schwab’s CEO Walt Bettinger is famous for being a very cautious and conservative person when it comes to business, so it’s not really likely for him to suddenly embrace crypto.
Kostya Etus, a portfolio manager at money management firm CLS Investments says Schwab is “more methodical in launching new products and evaluating new initiatives, having a longer-term view and outlook, because they don’t want to abandon something that doesn’t work”. “Another way to put it is that they are very cost-conscious”, added he.
One thing is sure, merged or not, TD Ameritrade and Schwab will still sit behind Fidelity Investments.
Even though it stands behind Schwab when it comes to traditional brokerage services, Fidelity managed to launch a crypto brokerage and custodian for institutional clients, Fidelity Digital Assets, earlier this year. And not just that, but they recently got a NY trading license.
Samuel Lee, a financial advisor at SVRN Asset Management said:
“Fidelity can be more experimental with crypto services than Charles Schwab and TD Ameritrade since it is privately held and more free of shareholders’ opinion over new investments than the other two public companies.”
So, if the merger does happen, and Schwab takes over TD Ameritrade, the newly combined company could be worth more than $5 trillion in assets with more than 20 million clients. Still, Fidelity takes a lead even here with the assets worth nearly $8 trillion and more than 30 million clients.
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